rv£0'""'v
-jz UNITED STATES ENVIRONMENTAL PROTECTION AGENCY
) WASHINGTON D C 20460
0F1CE OF
POLICV FLANNiNC AND E''AL0 ATiON
February 26, 1990
Enclosed for your review is a draft report, Environmental Labeling in the United
States, Background Research, Issues, and Recommendations, prepared for
EPA's Office of Pollution Prevention.
This draft report, written by Applied Decision Analysis, surveys the status of labeling
programs in other countries and describes their goals and structures. The report also
reviews several U.S. government labeling programs and discusses their effectiveness.
Based on this research, Applied Decisions Analysis suggest goals, functions, and
structure for a national U.S. environmental labeling program.
We are sending you this report for your information; however, we are also very
interested in your review and comment on this report before we finalize it. If you have
any comments please send them to:
Sharon Stahl
U.S. Environmental Protection Agency
Office of Pollution Prevention
401 M. St. SW
PM-219
Washington, DC 20406
Please note that the report does not necessanly reflect EPA policy.
Thank you for your help in this matter.
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ADA-89-2085
ENVIRONMENTAL LABELING
IN THE UNITED STATES
BACKGROUND RESEARCH, ISSUES,
AND RECOMMENDATIONS
DRAFT REPORT
Prepared for:
Sharon Stahl
Office of Pollution Prevention
U.S. Environmental Protection Agency
401 M Street, S.W.
Washington, D.C. 20460
Prepared by:
Lori K. Carswell
Julia J. Langel
Adam B. Borison
Applied Oecision Analysis, Inc.
3000 Sand Hill Road 4-255
Menlo Park, CA 94025
Decembers, 1989
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This is a draft document that does not necessarily reflect
Environmental Protection Agency policy. The opinions expressed
herein are entirely those of the authors.
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FOREWORD AND ACKNOWLEDGEMENT
Applied Decision Analysis. Inc. has prepared this draft report for review by EPA
and other interested agencies. It is our hope that the report will generate discussion, as
well as serve as a basis for developing an environmental labeling program in the U.S
Comments on the report will be incorporated into a final version at a later date.
In preparing this report, ADA used information and source materials provided by
a large number of individuals from several different U.S. and foreign governments, as
well as industrial, non-profit, and academic backgrounds. In addition, the chapter
containing recommendations for a U.S. environmental labeling program was developed
with the assistance of three consultants:
Gary A. Davis
University of Tennessee, Knoxvitle
Energy. Environment, and Resources Center
Knoxville, Tennessee
John E. Kelly
JK Research Associates, Inc.
Austin, Texas
John A. Moore
Institute for Evaluating Health Risks
Irvine, Cafiforia
These individuals provided valuable information and Insights. They will also
review and comment upon this draft of the report
mm
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TABLE OF CONTENTS
P acs
I Introduction j
II Environmental Labeling Programs 2
Introduction 2
Overview ol Environmental Labeling Programs 3
West Germany - Blue Angel 4
Canada: Environmental Choice 1 ^
Japan: Eco-Mark 14
Norway 15
Sweden t &
Joint Scandinavian Program 17
European Economic Community 17
France 18
The Netherlands 1 a
Great Britain 1a
California: Proposition 65 19
Other Shopping and Labeling Programs 22
III. Effectiveness of Existing Labeling Programs 25
in the U.S.
Introduction 25
Scope of Review 25
information Sources 26
Elements of Labeling Effectiveness 27
Food Nutrition Labeling 28
Household Appliance Energy Efficiency Labeling 33
Automobile Fuel Economy Labeling 38
Cigarette Labeling 40
Drug and Chemical Labeling 43
Seals and Certifications 46
Concluding Observations 43
IV. Analysis and Recommendations for a U.S. 51
Environmental Labeling Program
Introduction 51
Program Goals 51
Program Functions 53
Program Structure 62
Proposed Next Steps 6S
APENDIXA: References for Chapters II-IV A-1
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CHAPTER 1
INTRODUCTION
Government labeling of "environmentally compatible" products has become a
widely discussed topic in recent months. West Germany has had an environmental
labeling program for more than ten years. Several other countries, as well as the
European Economic Community, have started or are considering new environmental
labeling programs. This report descnbes the findings of research efforts on
environmental labeling in other countries and the effectiveness of labeling programs in
general, and provides recommendations as to the goals, functions, and structure of an
environmental labeling program in the U.S.
Chapter 2 surveys the status of the labeling programs in other countnes, and
descnbes their goals and structures. The California state law known as "Proposition 65"
is also descnbed, as it has had effects on labeling at the national level. Finally, a few
examples of other environmental shopping and recycling efforts in the U.S. are
discussed. The purpose of this chapter is to educate the reader on the status of other
environmental labeling programs, compare them, and assess their effectiveness when
possible.
Chapter 3 reviews several U.S. government labeling programs and discusses
their effectiveness. These programs include nutrition labeling, appliance energy
efficiency labeling, automobile fuel economy labeling, and cigarette labeling. The
effectiveness of third-party labels (such as the Good Housekeeping seal) is also
addressed. The purpose of this chapter is to apply the results of past labeling efforts to
future ones by identifying the key factors that determine the success of a labeling
program.
Chapter 4 combines the insights gained from the second and third chapters with
additional research results to suggest the goals, functions, and structure for a U S
environmental labeling program. The purpose of this chapter is to recommend how a
U.S. environmental labeling program should operate, but not to argue in favor of its
existence. The chapter assumes that the program may be pursued, and proposes how
best to do so.
Also included in Chapter 4 are the recommended next steps for EPA to take if an
environmental labeling program is pursued. These indude immediate actions and
additional research.
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CHAPTER 2
ENVIRONMENTAL LABELING PROGRAMS
Introduction
Environmental labels, or "eco-labels," are government-sponsored seals of
approval that are applied to certain products to inform consumers about the
environmental impacts of the products. The first major environmental labeling program
was launched over ten years ago by West Germany. During the last two years, several
other federal governments have begun similar programs. The primary purpose of this
report is to evaluate the options for implementing such a national-level labeling program
in the United States (U.S.)
In the U.S.. a wide variety of activities involving the dissemination of
environmental information have taken place mostly at the state and local level. One
example of note is California's Proposition 65. Other examples include "environmental
shopping" campaigns and catalogs, and recycling-labeling programs.
This chapter focuses on government-sponsored environmental labeling programs
m countries other than the U.S.. and also discusses related activities in the U.S. In the
following sections, we list the major non-U.S. labeling programs and describe their main
features and similarities. We also include a section describing California's Proposition
65 and another listing some of the relevant environmental shopping, consumer-
information. and recycling-labeling programs in the U.S.
The information sources for this chapter are given in Appendix A. Published
information about international environmental labeling programs was quite scarce until
recently. The news me
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Overview of Environmental Labeling Programs
The ma/or environmental laDelmg programs are r_in 5y -ne governments 2 5-
Germany. Canada, Japan, and Norway Several otner countnes as well as the
European Economic Community (EEC), are preparing plans for labeling programs Tre
major programs emphasize positive, rather than negative, labeling, products receive a
label indicating that they are in some way aligned with the goal of preserving the
environment. The programs share similar goals and procedures. Their goals include
helping consumers make environmentally-conscious purchases,
encouraging product manufacturers and sellers to develop environmentally
acceptable products and manufacturing processes, and
increasing environmental awareness in general.
California's Proposition 65 is structured differently; it uses negative, or warning,
labels. In addition to eliminating pollutants from drinking water, it has the ambitious goal
of protecting consumers and workers from carcinogenic or reproductive-toxic
substances; it emphasizes preventing health risks rather than just protecting the
environment. Other relevant programs in the U.S. have different goals ranging from
promoting recycling to reducing municipal solid waste to promoting environmental
protection in general.
The labeling programs in other countries are usually administered by a
government organization and/or an independent advisory board, and often involve the
public. Products or product categories are selected as candidates to receive the label.
An organization or board designs criteria for awanfing the label to these products.
Manufacturers voluntarily apply to use the label on their products, and if accepted, pay a
small fee for the right to do so.
Proposition 65 is implemented by the Governor of California, an advisory board,
the State Health and Welfare Agency, and several other agencies. It is enforced by the
State Attorney General's office, and it also involves the public. Other programs
discussed in this chapter have a variety of administrative structures.
The sections below describe the environmental labeling programs in West
Germany, Canada, Japan, and Norway. We also discuss the plans for similar programs
m Sweden, a joint Scandinavian program, an EEC-wide program, and the plans in other
countries. To the extent possible, the following aspects are covered for each program
its background and history,
the product categories it covers,
ttje type of label(s) it uses,
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the governmental or institutional Drocesses involved.
me criteria for using the label on products and
« the effectiveness of the program (if known, n modifying consumers" and
producers' knowledge and behavior
The effectiveness of the programs (and of labeling in general) ts particularly important to
our evaluation of ways to implement a similar program in the U.S. Effectiveness is
made up of three components:
Awareness - do consumers and producers know about the labels?
Acceptance and Values - how do consumers and producers react to the
labels? Oo they care whether a product is labeled or not? Do they agree with
the goals of the labeling program?
Choice Behavior - if consumers and producers are aware of the labels, and
care about them, do they affect consumer choices?
The sections below provide information about the effectiveness of the environmental
labeling programs along these three dimensions, where such information is available.
The non-U.S. environmental labeling programs are organized in chronological
order: West Germany's program was begun first, followed by Canada and Japan on
approximately the same schedule, followed by Norway, Sweden, the joint Scandinavian
program, the EEC, and other proposed programs. Proposition 65 and selected relevant
U.S. shopping, information, and labeling programs are discussed in the later sections.
Table 1 summarizes the key characteristics of the non-U.S. environmental labeling
programs and Proposition 65. Figure 1 shows reproductions of the environmental labels
used in West Germany, Canada, and Japan.
West Germany: Blue Anoel
West Germany is recognized as the innovator of "eaHabeling," having launched
its program ten years before anyone else. In 1976, the Organization for Economic
Cooperation and Development (OECD) adopted a Recommendation urging its members
to develop comprehensive waste management policies, inducing information
campaigns for industry and consumers. Partly in response to this. West Germany's
Federal Environment Agency (FEA) established the Blue Angel program in 1978.
Blue Angel labels were approved for 500 products by 1984. In the last two years,
this number has risen dramatically. By 1987, the label appeared on 2000 products; by
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TABLE 1.
SUMMARY OF FIVE MAJOR LABELING PROGRAMS
CATEGORY
PROGRAM
BACKGROUND, HISTORY
PRODUCT CATEGORIES
TYPE OF LABEL
INSTITUTIONS
PRODUCI
CRITERIA
EFFECTS
West Germany:
Blue Angel
Est 1978
500 Products by 1984
2000 Products by 1987
3000 Products by 1988
Now over 3100 Products
in 57 cateoones.
57 Categories
Incl aerosols, recyclables,
paints, batteries, car parts,
boilers, appliances
Blue Angel
Blue logo with
words of explan-
ation
Est by Federal
Environment Agency,
run by FEA,
Environmental Label
Jury, Inst lor Product
Safety and Labelling
Cradle io guvt
approach
Qeiielicul
compared io
Other product
of same purpose
1 liijhly
.u Ceptetl
iecOQflize
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Canada - EcoLogo
West Germany - Blue Angel
Japan - EcoMark
1. ENVIRONMENTAL LABELS USED IN OTHER COUNTRIES
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1988. it appeared on 3000 products in 50 categories As of August 1989. 3100 prccLcrs
m 57 categories were "abeled Ninety percent of the products bearing the iabei are
~ar^*a(r_.'ec oy Wes; Ge"~an ccmoanies. the other ten oercer: are rrari-,ac*o.,,-?c - /
cor-oanies in *welve o;ner E-'QDean countries The categories of products ccverec a*e
Giverse Tney include
Non-CFC aerosols
Returnable glass bottles
Bottle banks (collection systems for used bottles)
A variety of recycled paper, rubber, and glass products
Re-useable packaging
Re-treaded tires
Asbestos-free floor covenngs, clutch facings, brake linings
Low-pollution and low-mineral paints
Zinc-air battenes
Low-emission oil- and gas-fired boilers
Low-noise appliances and vehicles
Solar-energy products.
A complete list of labeled products appears in Table 2.
The label West Germany uses is the "Blue Angel," an angel inside a circle of
grain. The logo was adapted from the logo of the United Nations Environment Program.
The wording on the logo onginally read "Environment-friendly because..." followed by
the cntenon used, for example, "contains more than 50% recycled material." However,
the wording on the label has been accused of being misleading; environmental groups
claim that no product is "environment-friendly." The wording is thus being simplified.
For example, one label reads "Helps reduce waste."
The process for defining product categories, establishing critena, and approving
products for the Blue Angel involves three groups: the Federal Environment Association
(FEA), the Environmental Label Jury (EL Jury), which is a group of representatives from
industry, scientific, and consumer organizations, and the Institute for Product Safety and
Labeling (abbreviated RAL), an independent standards-setting organization.
Bnefly, the process is as follows. The general public, including product
manufacturers, may suggest products or categories to the FEA. The FEA screens
these suggestions and passes them on to the EL Jury, which then formulates a list of
products or product categories for detailed evaluation. Next, the RAL organizes public
hearings and the FEA appoints a group of experts who define the criteria for awarding
the Blue Angel to products in these categories.
The hearings are chaired by the RAL and involve the FEA and several additional
participants: the Federation of German Industries, the Consumers' Working Group, and
the Goods Test Foundation, a consumer quality testing organization. Thus industry and
consumer interests are represented over and above their representation on the EL Jury.
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TABLE 2.
PRODUCT CATEGORIES IN WEST GERMANY
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" - ' " tCCfi ' I r C\
'u'i'ibli qlisi Dot Mr*
moui f 1 uorocirboni in the if til of cosmetics (incl hair
'Sf*r> iftaoo* tnc 'u'nHu'( sprjys ind sprays 'or eery da* use purposes
(till 1t I? 1089)
low 'itte h|i'icf in, dfodoriflti and sfw««ng
'oi»< (from 01 01 '0>
<5>4SS collection b i n campaign
urn t»r» crepe paper mjdc frqm recycled pjpc
law noise liwn movert
low fMitiion sil'4tQ«iburners
.asbestos Iree Moor coverings
tsbestos free brake linings
lo» pollutant coatings
powder coalings
ijlt lrtt, neutralizing spreading material
'(cycled paper
recyclable printed material
tmc air-batteries
pottmg containers made 'rom recycled materials
corrosion protection coatings tew in lead and chromates
Curable, low-noise car mufflers
asbestosfree clutch linings
sound-proofed glass collection bins lor noise sensitive areas
waste water-poor car wash plants
cn₯irona«ntilly compatit>Mapipe cleanser
reusable capsules for ereta machines and soda s-iphons
reusable drop boa for fI«d
reusable packings for transportation
reusable try* and similar industrial packings
waste water neutral cold cleanser
products oade fro* recycled plastics and rubber
not or vehicles with eahaust fit treatment
water-saving toilet flush tanks
electronically operated shower batteries
pesticide-free pest control for indoor use
wall paper made froai recycled paper
construct ion materials made Iroa recycled paper
PO-free cooling and insulation liquids for electrical appliances
Iow-formaldehyde products froa wooden materials (for indoor use)
low-emission gas burners
love*ittioA combined water hoatiny and eye! mg-water heaters
low-emission burner-boiIer units with gas burner (with fan)
lo-w-notse mooed
water-sawing flow restrictors
water-sawing pressurned f I ushers
soil meliorators and soil agents made froa compost materials
low-emission energy-sawing oil burner - bo 11er units
solar-power operated products and mechanical watches
readily biodegradable lubricants for aotor-raw chains
construction mate ials made mainly of recycled glass
lithiua batteries free of mercury and cadmiv*
-environmental ticket* (for public transport)
highly insulating mulli-layer window glass
low-noise construction machines 1 compressors. power aggregates, .nccl
loaders, eacavators. eacavator loaders)
low noise garden chaff cutters for compost materials
reusable, refutable typewriting ribbon cassettes and toner cartridges
recycled cardboard
thermal processes (using hot air) to coabal aylophagowt insects
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Following the heanngs, the recommendations of the RAL and the FEA s exoe'*
are s-C'^ea to the EL Jury Tne Jur/ makes the final decs.ens c~ ,-9 -c _s c- ;
D.'ccuct category and T.e cntena to oe used, and publicizes its ceas-c-s
With the criteria in place, manufacturers apply for the right to use the laDel on
their products, and the product testing process begins The RAL is responsible for
testing products with the cooperation of the FEA. Before a manufacturer is awarded a
contract to use the Blue Angel, comments are solicited from the FEA, the Federal State
m which the manufacturer is located, and possibly other institutions (such as the Federal
Health Agency). The local agencies that are familiar with the manufacturer are quened
to find out whether the manufacturer complies with local pollution standards, and how its
environmental record stands in general. If the manufacturer has shortcomings in this
area, the Blue Angel may be refused for its products.
If the RAL concludes that the product is eligible to use the Blue Angel, a pnvate
contract is wntten between the manufacturer and the RAL The manufacturer pays a
small fee and may then use the label for the next three years. The fee covers the RAL's
costs to administer the program. The contract terms resemble those of licensing a
trademark. Violations of the contract, or the use of the trademark (Blue Angel) without a
contract, would be enforced through the civil court system.
In general, the Blue Angel can be awarded to products which "when compared
with other products fulfilling the same function and when considered in their entirety,
taking into account all aspects of environmental protection (including the economical
use of raw matenaJs). are. as a whole, characterized by a particularly high degree of
environmental soundness without thereby significantly reducing their practical value and
impainng their safety." (Source: FEA, Information Sheet on the Environmental Label,
in Environmental Labelling in the EFTA-Countries, August 1989.)
The designers of the Blue Angel program recognized the difficulty of evaluating
the environmental merit of a product on many characteristics, over the product's entire
life cycle. Therefore, traditionally the qualification criteria were limited to a single most
important cnterion that allowed comparison with other products. For example, the
cnterion for recycled paper products was the percentage of waste paper content. The
single cnterion selected for vacuum cleaners, on the other hand, was quietness.
This "single-criterion" approach has been criticized by manufacturers and
consumers as being narrow-minded. However, recent statements by individuals
involved in the program emphasize that the design of product criteria and product
testing do include consideration of the entire product cycle and of all aspects of
environmental protection. They explicitly recognize that for specific product groups, the
environmental criteria can be narrowed down to individual aspects and phases of
production because of irrelevance, lack of differentiation, or lack of available information
on the other environmental impacts of the products. The Blue Angel program has
always used a "cradle-to-grave" approach to developing product criteria, although the
resulting criteria may consist of only one criterion.
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Recently the standard for awarding the Blue Angel to recycled paper products
was ;,gntened from a requirement of 51% waste paper to ere of *00°o waste oaoer
Other standards are also being reviewed and tightened to keep them from becoming
obsolete as technologies improve and more products meet the ongrnal standards
The Blue Angel program is the only "positive eco-labeling" program that has been
m place long enough to be evaluated along all three dimensions of effectiveness. The
large number of products carrying the Blue Angel logo almost certainly means that
producers (at least in some product categones) are aware of the program, have
accepted it, and consider it important enough to warrant changing their products and/or
manufacturing processes. About 200 suggestions for new product categones are
received each year from manufacturers.
One source (a report by Environmental Data Services, abbreviated ENOS) gives
additional evidence that the Blue Angel has succeeded in encouraging manufacturers to
develop ways to reduce pollution, and to consider their products' effects on the
environment when making design and manufacturing decisions. For example, paper
manufacturers have been significantly affected by consumer demand for recycled paper
bearing the Blue Angel label. One manufacturer invested substantially in a new
machine to use 100% waste paper in a variety of tissue products.
On the consumer side, the Blue Angel program seems to be well-known and has
contributed to consumer awareness of environmental issues. A survey of 3000
households in 1987 showed that 78.9% were familiar with the Blue Angel label.
Consumer demand for recycled paper products and acrylic paints with the Blue Angel
logo has been healthy. However, according to several sources, there is no published,
thorough study of the impacts of the Blue Angel program on particular product sectors
or brands, or on changes in consumer attitudes. The ENOS report examines this issue
in a qualitative way. The only quantitative evidence of the program is stated by the
German government: The program has resulted in a cumulative reduction of 40.000
tonnes of solvents from household paints entering the waste stream.
The Blue Angel program appears to have been a success in achieving its main
goals. All of the other environmental labeling programs underway or being planned
have been designed with the Blue Angel program as the model. Many observers have
commented that West Germans are unusually environmentally aware to begin with -
more so than other Europeans, and probably more so than Canadans or Americans.
Reasons typicaBy given for this include the Green Party's role in German politics, and
the well-publicized acidic damage to German forests such as the Black Forest. The
"Green attitude" in West Germany made the Blue Anget program possible, and has
contributed to its success.
Oespite its success, the Blue Angel program has received some criticism.
Complaints about the program are that the criteria have become outdated for some
product categories, the overall quality of the products is not given sufficient
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consideration, and that the smgle-cntenon approach is not broad enough
Manufacturers m some oroduct sectors have decided not to use the lego on their
ccc-cs although they could One reason tney g>ve :s :nat they disagree wi'h, -re
'ego s cntena Another is a fear that their products that do not carry tne logo will oe
perceived as inferior to those that do carry it
Still, many companies see the logo as a marketing opportunity, and use it
successfully as such The varying reactions to the program seem to depend on the
particular marketplace, and the company's attitude toward its consumers and its
marketing strategies. The program has been revised in response to these criticisms.
For example, many of the product cntena and corresponding labels have been changed
Also, a major consumer testing organization is now formally included in the testing
process to venfy the overall quality of the products that receive the Blue Angel.
Canada: Environmental Choice
Canadians have become increasingly concerned about their environment in
recent years. Acid deposition in Canada, and the disagreements between the Canadian
and U.S. governments about its causes, are just one example of the concern on the part
of the Canadian citizens and their government. In April 1987, the World Commission on
Environment and Development published a report, "Our Common Future," that
stimulated the formation of a Canadian task force to consider the report's
recommendations.
A series of meetings and the publication of policy documents followed. In June
1988, the Canadian Government launched its Environmentally Friendly Products
campaign, intended to help individual consumers be better informed and make a
difference through their buying power. At the first meeting of the advisory and
management board of the program, the board members voted to change the name to
Environmental Choice for the same reason the Blue Angel worting was changed:
"Environmentally friendly" is not an accurate description, as products can be
environmentally benign without really improving the environment. However, the front of
the Environmental Choice publicity brochure still reads "How to Find Planet-Friendly
Products."
The first three product guidelines for Environmental Choice were completed m
July 1989. Six more guidelines are currently proposed. The product categones covered
by the throe completed guidelines are:
re-refined oil used in the base stock for lubricating oil
construction material consisting of recycled wood-based cellulose fiber
plastic products using recycled plastic.
The product categories covered by the six proposed guidelines (announced on August
1, 1989) are:
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zinc-air batteries
sanitary paper from recycled paper
fine paper from recycled paper
vegetable oils lor consumer and industnal use (but not oils for food products)
recycled rubber
low-pollution water-based paints.
The label that will be used to distinguish these products is the "EcoLogo," a
maple leaf made up of three doves, symbolizing the three sectors that join forces to
protect the environment: the government, industry, and consumers. The logo will be
accompanied with an explanatory phrase that varies from product to product, for
example, "over 50% re-refined oil" or "contains 100% recycled paper." These phrases
must appear in French and English below the logo. They are not inscribed within the
logo, as are the phrases on the Blue Angel. Product manufacturers have some freedom
to choose the placement and lettering size of the phrases.
Canada's process for defining product categories, establishing guidelines, and
approving products is modeled after West Germany's. Three main groups are involved
in the process: Environment Canada (the government agency sponsoring the program),
the advisory/managerial Environmental Choice Board (a panel of experts from various
fields), and the Canadian Standards Association (CSA), an independent testing and
standards-setting organization. These three groups closely parallel the three
organizations involved in the Blue Angel program. In addition, a central Secretariat
composed of about ten staff members provides support for the program. The Minister of
the Environment represents the program politically.
The labeling process in Canada is still undergoing some revision. Based on our
discussions with the Secretariat. Board members, and CSA, we understand that the
present process is as follows. Suggestions for product categories are solicited by the
Secretariat from the general public, including individuals, business, and other
organizations. These suggestions are screened by the Board; Environment Canada
prepares a briefing note on each accepted suggestion. The Board reviews these and
may accept or reject the product category. The Board may also ask for more technical
information from CSA, Environment Canada, or others.
If the product category is accepted. CSA takes charge of preparing the guidelines
(criteria) for the category. CSA has a Coordinating Technical Committee responsible for
developing product guidelines. The Technical Committee sets up task forces, using
experts from business, environmental, and consumer backgrounds, to develop specific
guidelines. The Technical Committee, although set up by CSA, includes members from
Environment Canada and several other organizations as well as three members from
CSA.
Once the guidelines are prepared, they are reviewed by the Board and may be
accepted, rejected, or set aside for further review or development. Once the guidelines
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are accepted, they are armoured by the Minister of the Environment The dloIic
ras 60 days to comment Ccn-ments are directed to the CSA, whicn :Nen orepa'es s
report on the results The Board reviews the report to prepare a final cees.cn on ;re
¦nclusion of the product category in the program, a 2/3 majority vote is necessary *cr
acceptance of the category The Board prepares a recommendation and a puoiic
announcement for accepted categones
With the product category and guidelines in place, a manufacturer may apply to
CSA for a license to use the EcoLogo. If its product is accepted by the CSA, the
manufacturer pays a license fee ($1500 to $5000 annually) and is allowed to use the
logo for one to three years. The manufacturer also pays for any product testing required
by the guidelines. These fees are higher than those imposed by the Blue Angel
program. The Environmental Choice program is intended to be self-sustaining within
two years.
The Environmental Choice program uses a cradle-to-grave approach to
determine product critena. The objectives of the program clearly state that the products
labeled {"product, service, process or packaging"), must be environmentally sound in
their production, use. and disposal, without any reduction in performance and safety,
when compared to other products fulfilling the same function. The implementation of
the cradle-to-grave approach, however, is still somewhat ad hoc. In the short term, the
Environmental Choice program is mainly concerned with selecting products that:
are environmentally benign,
have an obvious, compelling reason for being selected, and
have a high market profile.
Earlier in the implementation of the program, a matrix-based approach was
considered that would award points to each candidate product based on its
environmental acceptability at each stage of its life cyde. The points would be weighted
to arrive at a final score, which would have to show an acceptable average level in order
for a product to be awarded the logo. This method is still being developed and is not
explicitly used in the program yet.
The Environmental Choice program has not been in place long enough for its
effectiveness to be assessed. According to individuals involved in the program, the
response from consumers and most industry sectors has been positive. As in Germany,
businesses specializing in recycled products have been particularly enthusiastic.
Based on the statements made in the three established product guidelines, the
Environmental Choice program has the potential to be very effective in reducing waste
and pollution. The guidelines state that 300 million liters of used oil from automobiles
are discarded each year; waste paper enters the waste stream at a rate of 4 million
tonnes annually, contributing about 35% by weight of the municipal waste stream; and
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plastic products account for approximately 7% by weight, or 30% by volume, of annual
mumciDal solid waste m Canada Thus, the potential for waste reduction is large just
from the first three proauct categories, which is no ccubt one of the rrain 'easors
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have to be not only free of CFCs to qualify, but also free of carbon dioxide due to its
cc-t'ioution to global warming
According to Japan s Environment Agency, responses from consumer ana
environmental organizations have been positive, while industry has been less
enthusiastic In a brief informal survey in Japan, several well-educated professionals
knew very irnle about the program or were even unaware of it. No other information is
available yet as to the effectiveness of the program.
Norway
Norway's eco-labeling program is planned, but is not fully underway. It has
developed concurrently with a fair amount of debate about a possible coordinated
labeling system for ail the Scandinavian countries (discussed below). A working group
has studied and proposed alternatives for implementing Norway's eco-labeling system.
At this time, the program in Norway is being set up, and it should be in operation around
the end of 1989.
The first set of product groups proposed for the program may include:
paper products, including bags, packaging, and wallpaper
aerosols that contain no ozone-depleting substances
refrigerators that contain no CFCs
low-noise products
insulating material
returnable containers.
The second set of products will indude those for which it is more difficult to develop
cntena, such as household chemicals.
According to the ENDS report, Norway previously planned to use the Blue Angel
as the logo for its program because it is well established and recognized. However,
more recent sources indteate that the Blue Angel will not be used. The joint
Scandinavian program will require a common symbol for all the Scandinavian countnes,
and a design tor this label has been proposed.
The plan tor implementing the program calls for a new, independent non-profit
foundation to run the program; a Council. Board, and Secretariat will be involved. The
Board, which will consist ot eight members appointed by Norwegian government
agencies and several other organizations, will have the authority to decide on adopting
product criteria and on awarding the label to specific products.
The Council will be the foundation's "supreme governing body" and will consist of
19 members, also from government agencies and other interested groups. The
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Council's role will be to set guidelines for the activities of the foundation, including
procedures for developing and adopting labeling cntena
Companies applying for the label will have to provide their own eviaence tnai
rneir products comply Product testing may also be earned out by Norway's official
consumer organization Successful applicant companies will pay a small initial fee ana
an annual fee to use the label on each approved product, as well as any testing
expenses. The fees will be used to pay for a public information campaign as well as
program expenses. After approval, the applicant may use the label for two to three
years, after which time the product must again be tested. The Board is expected to
review the standards frequently, making them stricter as justified by technological
developments.
The product criteria for each category will be developed by independent groups
of experts. The general criteria will include the recovery of raw materials, manufactunng
processes, use, and waste. Products awarded the label must be the least
environmentally harmful when compared with other products fulfilling the same function.
In addition, products requiring labeling because of potential dangers to health or safety
cannot be awarded the label.
Norway will start a consumer education campaign once labeled products are
available for purchase. Industry has expressed keen interest in Norway's program.
One reason for this is the perception that the environmental label may be a valuable
marketing tool, both in the Norwegian market and in the EEC. Other effects of the
program are not yet known.
Sweden
Plans for an eco-labeling program in Sweden have been running just slightly
behind those in Norway. In late December 1988, a Government Commission for
Sweden presented a proposal for an environmental labeling program to the Minister for
consumer affairs. The proposal recommended that the program be administered by an
independent foundation that would have a Board, an advisory panel of representatives,
and a Secretariat
The proposed program resembled the planned program in Norway. As in
Norway, the product criteria would be developed with the assistance of outside agencies
and experts. The criteria would take into account the entire product life cyde, and
products bearing the label "should not have too large a share of the market"
An alternative to setting up a new independent foundation was to coordinate the
activities of the program with the Swedish Standards Institution, a standards-setting and
certification organization. Very recently, the Swedish government decided in favor of
this alternative, and the current plan is to let the Standards Institution administer the
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program They will set up groups similar to the proposed board and advisory oar,el
The system will probably oegm operating around the beginning of 1990
Joint Scandinavian Program
As indicated above, there has been much discussion dunng the past year about
the possibility of a coordinated eco-labelmg program m Scandinavia. It has been
decided that the Nordic (Scandinavian) countnes will, in fact, coordinate their labeling
systems with a common symbol and a common set of labeling cntena. Norway and
Sweden, which have labeling programs underway or planned, will be the first
participants. Finland and Iceland are expected to follow. Denmark falls into a unique
category, as it is a both a member of the EEC and a Scandinavian country. Apparently
Denmark will participate in the EEC labeling program rather than the Scandinavian
program.
European Economic Community
The European Commission, in response to West Germany's Blue Angel program
and in preparation for the opening of the European markets in 1992. has been
investigating the possibility of a Community-wide eco-labeling program. The
Commission has stated in its Environmental Action Programs that it intends to promote
environmental protection, harmonize product standards, reduce waste, and promote
recycling. The Commission has funded a feasibility study on the issue, earned out by
the Danish Technological Institute in Copenhagen. Meetings were conducted in
September 1989 to review the results of the study. The final report will be finished in
December 1989.
Our research indicates that the Commission has decided that some kind of EEC-
wide labeling program should be adopted before the opening of the Single Market.
However, the details of the operation of the program must still be determined. The
Commission may present a proposal to Council of Environment Ministers early in 1990,
and discussions between the EEC and its members will begin then.
Preliminary plans for the EEC-wide labeling program call for it to be similar to,
and consistent with, other programs. Products would be labeled on a cradle-to-grave
basis and labeling would be voluntary. A multidisciplinary group of representatives
would be involved. The management structure of the program would operate "at two
levels:
national as far as product selection, quality objectives and administrative
procedures are concerned
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international as far as common cnteria defining and monitoring of their
application are concerned " (Source Environmental Laoeiimg in the EFTA-
Countries August 1989 )
The program wouid utilize a multi-criteria approach in the medium and long term
Initially, however, the program might focus on labeling products more suitable for using
a single critenon, such as recycled paper
France
The ENDS report states that the French are certain to go ahead with an eco-
labeling program during 1989 or early 1990. A feasibility study is due for completion
dunng 1989. In earlier planning stages, the program was expected to cover CFC-free
aerosols, recycled paper products, batteries, and recyclable drink containers. Overall,
the program was planned to be similar to Germany's program.
The Netherlands
According to the ENOS report, the Dutch have been discussing eco-labeling for
some time. A feasibility study into the issue was commissioned and is being carried out
by the Centre for Energy Saving and Clean Technology in Delft. Following the study, it
is expected that the authorities will discuss the possibilities and probably launch a
program in 1990. Our conversations with the embassy have confirmed that the program
is planned, but not yet established, and the details still must be worked out. The
program will be developed by the Department of the Environment with the help of
industry and the government Councils. There is no firm timetable yet.
Great Britain
The government of the United Kingdom (UK) recently published a discussion
report on environmental labeling, which sets forth the government's position on the
issue. The UK government favors an EEC eco-labeling program, and is positioning
itself to influence the development of such a program. The report describes the system
the government prefers for an EEC labeling program.
One key point made in the report is that the UK government prefers that the
product criteria be limited in scope; for a variety of reasons, the UK government is not m
favor of a cradle-to-grave approach. Thus, the UK is in direct disagreement with the
philosophy of several other countries that have started or planned labeling programs.
Since the publication of the government report, several manufacturing firms, trade and
industry groups, and consumer associations in Great Britain have stated their support
for some sort of eco-labeling program. At the same time, they have stated their
disagreement with the government's preference not to use a cradle-to-grave approach.
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California: Proposition 65
Proposition 65, officially known as The Safe Dnnking Water and Toxic
Enforcement Act of i986. is an initiative statute of the State of California It became law
as the result of a cstizen petition that placed it on the general election ballot, voters
passed it by nearly a two to one margin Since its passage nearly three years ago, it
has caused substantial controversy. It has led to prominent labeling of products such as
alcohol and tobacco, and has caused widespread debate over the labeling requirements
for a vanety of other products. The effects of the law are still unfolding, and these
developments are followed closely by California newspapers.
Proposition 65 requires the governor to list chemicals known to the state to cause
cancer or reproductive toxic effects. Twelve months after the chemical is listed,
businesses must not knowingly expose any individual to a "significant" risk level of the
chemical without first providing a "clear and reasonable warning." This applies to
consumers of a product containing the chemical, as well as workers who are exposed to
the chemical on the job. Twenty months after the chemical is listed, businesses must
not knowingly discharge the chemical in "significant" amounts into the drinking water
supply. The protection of drinking water is a strict requirement; labels do not apply.
The "no significant risk level" was defined for reproductive toxins as being a
"1000-fold safety factor," meaning that the amount of the chemical present should be no
more than 1/1000 of an amount that causes "no observable effect." For substances
causing cancer, the "no significant risk" level is the level resulting in one excess case of
cancer per 100,000 people exposed for a lifetime. The latter definition was not given in
the text of the proposition, but was chosen during the Health and Welfare Agency's
interpretation process. The "1 in 100,000" risk level is consistent with federal regulatory
policy.
The law is enforced as follows. Sixty days after notifying public authorities
(usually the state Attorney General's office) of a potential violation, any individual or
group may sue the violator. (Alternatively, the authorities may prosecute the alleged
violator.) The burden of proof is on the accused violator to show that it is obeying the
law, rather than on the accuser to show otherwise. The individual or group bringing the
suit may eventually receive a percentage of the penalty fines imposed on the violator.
Both this "bounty hunter" incentive and the reversed burden of proof represent a marked
change from traditional regulation of toxic or carcinogenic substances. Each violation of
the law carries fines of up to $2500 per day.
Following its passage, Governor Oeukmejian carried out the mandates of the
proposition by naming a scientific advisory panel to help him construct lists of
carcinogens and reproductive toxins. The governor also designated the State Health
and Welfare Agency as the lead agency for directing implementation of the proposition.
Several other state agencies also provide support.
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On February 27 1987, the governor orcdairred an initial ;.st of 25 ca'ccge-s
ana tnree reproductive toxicants, and a list of over 200 candidate (but not confirmee;
carcinogens This action was followed almost immediately by the filing of a suit (AFL-
ClO et aJ vs Deukmejian et aJ.) challenging that the list was insufficient lnApnM987
a judge ruled that the list should be expanded to include more than 200 chemicals. This
ruling was appealed. On July 20, 1989. the Court of AppeaJ confirmed the requirement
to expand the list. However, by mid-1988 the list had been expanded anyway and it
now contains well over 200 compounds.
Critics of the law charge that it will result in a proliferation of labels. There are
thousands of products that contain some amount of the listed chemicals. The authors of
the proposition claim its goal is not to see widespread warning labels on products, but to
encourage manufacturers to make their products safe (and therefore not labeled.)
However, some products are by their very nature carcinogens and/or reproductive
toxins, and thus cannot escape labeling. Alcohol and tobacco are good examples.
Early in the implementation of the law, the alcoholic beverage industries agreed
to post warning signs in stores, bars, and restaurants that sett liquor. The signs warn of
both the carcinogenic and reproductive toxic effects of alcohol. The industry also
decided not to oppose actively federal legislation to label all alcoholic beverage
containers with birth defect warnings. The federal Alcohol Labeling Law was signed by
President Reagan on November 18,1988. Labeled alcoholic beverages will appear in
the stores by the end of 1989.
Warnings on cigarette packages have been required by federal law since 1966.
However, other forms of tobacco have not been labeled. In the first major enforcement
action under Proposition 65, the state attorney general filed suit against tobacco
companies. Safeway Stores, other grocery storm, and the Ingredient Communication
Council (ICC) for failure to provide warning with the sale of cigars and pipe tobacco. In
a settlement reached in October 1988. the tobacco companies agreed to label their
products' packages in a manner similar to the federal cigarette labels.
Proposition 65 has precipitated much activity in addition to the developments
described above. For example, industry groups representing food, drug, and cosmetic
manufacturers have pursued various legal avenues to challenge the law and exempt
themselves from its regulations. They have alleged that the law is pre-empted by FDA
regulation and is unconstitutional. A temporary exemption was granted to food and drug
manufacturers that are regulated by FDA. These industries have also attempted to
have the law struck down altogether through federal avenues, on the grounds that it
represents a threat to the need for "national uniformity" with respect to safety warnings.
All these efforts have been unsuccessful thus far. According to the California Attorney
General's office, no final decisions have been made with regard to any of this litigation.
In addition to lobbying and pursuing legal avenues to undermine Proposition 65.
the same industry groups set up an 800-number telephone service to meet the
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requirement to inform consumers about product risks Instead of looking for labels or
warning signs in supermarkets, consumers were directed to use this toll-free nurrber -o
f.nd c-t whether a particular product earned a warning Many criticized '~'S aco'cac"'
In fact according to the San Francisco Chronicle, environmentalists laDelea t-3C0-
BALONEY " The 800-number was challenged in court, recently a Sacramento Scoer cr
Court judge ruled that it is not an acceptable warning system This ruling may set the
stage for a large number of lawsuits More than 8,300 products were represented by
the toll-free number. 500 of which were admitted by their manufacturers to require
warnings.
Other activity related to Proposition 65 is too broad to be desenbed in detail here
Examples of settled and pending lawsuits and 60-day notices are:
Pacific Gas and Electric is accused of discharging mineral oil into the dnnking
water supply and exposing workers to mineral oil at many of its substations.
Lantern mantles containing thorium dioxide were sold without the required
warning; the suit was settled and the lanterns are now labeled.
The Solano County district attorney brought a suit against sellers of certain
commercial paints, solvents, and resins for failing to provide clear and
reasonable warning; the suit was settled.
Employees of a plant nursery have filed suit alleging that they were exposed
to asbestos.
Lieutenant Governor Leo McCarthy has alleged that benzene is leaking from
174 underground storage tanks located throughout the state.
The manufacturer and certain retailers of Liquid Paper have allegedly
exposed users without a clear and reasonable warning; this product earned a
warning message available on the 800-number, and this 60-day notice is the
first one to be placed for a product covered by the 800-number since it was
struck down. The manufacturer agreed almost immediately to reformulate the
product.
Key observers of Proposition 65 have, predictably, disagreed as to its rnents and
effectiveness. Industry groups opposing the law have argued that it will be "too*
effective in the sense that it will lead to an overwhelming number of labels on food,
drugs, and cosmetics. This has not occurred so far, but could occur in the future as a
result of the rejection of the 800-number warning system.
The state Attorney General's office comments (unofficially) that there have been
some problems interpreting Proposition 65, but overall it is a good idea Other objective
observers have commented that it is too early to assess the law's full impact. For many
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products and industries, extensive litigation activities have delayed its implementation
In inc-stnes where ODposition has been less fierce, the law has added substantially *o
:ne sccoe of warnings on products that are known to cause ill effects
Other Shopping and Labeling Programs
A few examples of the other environmental shopping, information, and labeling
programs that are underway or planned in the U.S. are summanzed below. Several
other programs, including state and local recycling programs and other solid-waste
reduction programs, are descnbed in the Kashmanian/Abt Associates report (1989).
These other relevant programs, and the issues surrounding them, are much too
numerous to descnbe here.
One of the main difficulties with the wide van- y and large number of programs is
the fact that governments and industry associations ave not formulated a standard set
of definitions of "recyclable", "recycled", "biodegradable", and other such terms. As a
result, different industry groups, manufacturers, states and local governments have
adopted their own definitions, some of which are based on the EPA Procurement
Guidelines on cement and concrete, paper, lubricating oils, re-tread tires, and building
insulation products. The New York State recycling program, described below, is one
such effort.
New York State Recycling Emblem: In 1988, the New York State legislature passed the
Solid Waste Management Act of 1988 requiring the Department of Environmental
Conservation to set up a system for defining and labeling products that are recycled,
recyclable or reusable. The emblem program has two goals:
To encourage waste reduction and recycling among consumers and
manufacturers by informing them of products that meet established
standards tor recycled content
To protect consumers and manufacturers from misleading or false use of the
words "recycled." "recyclable." and "reusable."
The New York State emblem is an outline of the state, embraced by a pair of circling
arrows, Inside the emblem are written the words "recycled," "recyclable," or "reusable."
The product manufacturer may also include a statement of actual content of recycled
material inside the emblem, as long as it does not obscure any part of the original
design.
To qualify for the "recycled" emblem, a product must meet minimum waste
content percentages. These percentage standards have been established for several
product categories, including:
Building insulation
Newsprint
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High grade bleached printing and writing papers
Tissue products
Unbleached packaging
Recycled paperooard
Cement
Lubncating oils
Steel
Aluminum
Copper
e Plastics
Glass
Solvents.
These standards were sat in agreement with EPA Procurement Guidelines, where
applicable, and after consultation with interested industry groups. The guiding pnnciple
behind the standards is to indude as many products as possible initially, in an attempt
to gain support from manufacturers and awareness from consumers. The standards
may become more stringent once the program is established.
To use the "recydable" emblem, a manufacturer must demonstrate that the
consumer has actual opportunities to recyde the product. Similarly, to use the
"reusable" emblem, the manufacturer must demonstrate the existence of opportunities
to return the product for refilling or reuse.
The standards apply to any recyding emblem, statement, or advertisement used
on or about a product in New York State. Any manufacturer wishing to use such an
emblem or statement must submit proof that the product meets New York standards
and receive permission to use such an emblem or statement. The product
manufacturer may choose whether to use the New York State emblem, or to use
another emblem. The program is voluntary.
The department has conducted public meetings on the proposed standards, and
is now holding public hearings, as required by New York law. Program leaders expect
the standards to go into effect early in 1990. Once the standards have been
established, the program wilt conduct a public education campaign to teach consumers
about the program.
Pennsylvania Resources Council: The Pennsylvania Resources Coundl has published
a handbook, "Become an Environmental Shopper," that promotes recyding and
selective shopping. It emphasizes product packaging more strongly than product
content, although it mentions aerosols and other "hazardous chemicals." It also
provides tips for organizing environmental shopping campaigns. The Coundl also
prepares an Environmental Shopping Product List containing products "packaged in
recycled or recydable packaging."
Council on Economic Priorities: The Coundl on Economic Priorities publishes
'Shopping for a Better World," a compact-sized guide to "sotially responsible
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supermarket shopping " CEP also published Rating America's Corporate Consc.e'-ca a
book-length version The small guide rates 139 comoames on thetr performance aic~c
several artnoutes
Giving to chanty
Women's advancement
Minority advancement
Military contracts (or lack thereof)
Animal testing (or lack thereof)
Disclosure of information
Community outreach
Nuclear power
South Africa, and
Environment.
The "Environment" criteria emphasize packaging and recydability, although they also
mention pollution control equipment and biodegradability. Thus environmental impact is
just one factor in CEP's definition of socially responsible shopping.
Commercial Environmental Shopping Catalogs: Several enterprises have compiled
"environmental shopping" catalogs that sell products such as biodegradable diapers and
garbage bags. One well-publicized example is published by Seventh Generation in
Vermont, and others keep appearing. We do not know how many of these enterprises
are non-profit and have environmental protection as their fundamental goal, and how
many are profit-motivated.
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CHAPTER 3
EFFECTIVENESS OF EXISTING LABELING PROGRAMS IN THE U.S.
Introduction
A wide variety of consumer and industrial products carry labels required by the
government. These labels may provide a safety or health warning, or may simply
provide information that the government believes buyers should know. The labels are
tied to some larger policy goal or program, such as reducing demand for energy,
increasing safety, or promoting good health. They serve as substitutes for extensive
regulation that would prohibit all possibly detrimental or dangerous products or
ingredients. The government hopes that consumers will make more informed product
choices as a result of labeling programs. In addition, labeling protects product
manufacturers from liability.
This chapter covers the results of our "background" labeling research; it
summarizes a literature review on the effectiveness of several types of labels.
Immediately below, we describe the product categories covered by the literature review.
In the subsequent sections, we briefly describe our information sources, define the three
elements of labeling effectiveness, summarize available research on the effectiveness
of the selected types of labels, and conclude with an analysis of the factors that affect
the success of a labeling program.
Scope of Review
A wide variety of products carry warning labels or other government-required
labels. In assembling our literature review, we focused on a few specific categories of
labeled products. We were interested in categories where information exists on the
effectiveness of their labeling, and categories that are relevant to environmental
labeling, the broader topic of this report Thus, we are interested in commonly known
products that are available to. and purchased by. the average American consumer.
Also, we are especially interested in labeled products that present consumers
with a choice. It is difficult to measure the effectiveness or importance of a product label
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when consumers have little choice but to use the product, or when all the products n
fhe product category carry the same label
W.tn tnese goals in mind, we identified the following categones of procuc: 'aoe 5
food and nutntion labels,
household appliance energy efficiency labels,
« cigarette labels.
automobile fuel economy labels, and
drug and chemical labels.
The sections below discuss the effectiveness of labels in each of these categories. The
first four categones are given closer attention than the category of drug and chemical
labeling for two reasons: we found little research on drug and chemical labeling, and
labeled drugs and chemicals (especially prescription drugs) do not always present a
choice to consumers. Many prescription drugs are essential to life or health and are
only available with a warning label.
We also include a brief section that summarizes relevant research on the
effectiveness of seals and certifications; that is, labels that are not specific to a product
category.
A few other labeling categories are intentionally omitted from this report:
commercial pesticides, other poisons, and industrial materials and equipment. These
products are not frequently encountered by the average consumer, and therefore are
not as relevant to this report as are the other product categories.
Information Sourc
The information presented in this memorandum covers a wealth of material m
many subject categories. We searched several commercial and library databases for
combinations of key words such as "label" and "effect"; these databases included NTIS
and the Government Publications Office, trade and industry databases, business
publications, and academic journals. We also spoke with individuals at various
government offices and agencies.
The articles and reports we obtained include academic papers, final reports
prepared by contractors for government agencies, reports issued by government
agencies, and news articles. Among the reports that describe original research, the
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research methods vary widely, ranging from market research studies or surveys using 3
small number of respondents to an analysis of time series data on 1 2.000 consul's
Other reports we found are, like this chapter, literature reviews In severaJ places
m this chapter, we descnbe research that is summarized by other authors' literature
reviews The wide scope of this report and the large amount of information available
prohibited us from reviewing each anginal source cited in each literature review The
literature reviews all cover narrower sets of labeling categories than does this report
One literature review that proved extremely helpful is titled Review of the
Research Literature on the Effects of Health Warning Labels: A Report to the United
States Congress. It is dated June 1987 and was prepared by Macro Systems, inc. for
the National Institute on Alcohol Abuse and Alcoholism, tt is referenced here as the
NIAAA report and used mainly in the sections on cigarette labeling and drug and
chemical labeling.
Elements of Labeling Effectiveness
We have adopted a definition of "effectiveness" that is consistent with the
definitions used by other researchers as well as policy makers and market analysts.
Labeling effectiveness manifests itself in three ways, each of which builds upon the
previous ones:
Awareness
Acceptance, and
Behavior change.
These three components are often used to descnbe the stages of market penetration of
a new product or concept First, the consumer must become aware of the concept.
Next, he or she must accept the concept by reacting positively to it and/or perceiving
some value in it. Finally, to be truly effective or successful, the introduction of the
concept (or product or label) must result in some measurable behavior change.
In the case of a new product entering a market, behavior change would be
measured as the extent to which consumers purchase the product. With labels,
behavior change is measured as the extent to which consumers change their product
purchases in a way that is consistent with the intended effect of the label.
In the case of labeling, there may be a second, parallel effect in addition to the
effect on the consumer the effect on the producer. If producers believe that a label on
their product will be detrimental (or beneficial) to the sales of the product, they may
reformulate the product or otherwise change their strategies. This has been one effect
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of environmental labels such as West Germany's Blue Angel logo and California s
Proposition 65 warning labels However, for the labeled products discussed here we
uncovered I'file information on the specific producer ejects Often, laoeung o.-cg-a.s
are introduced along with government standards (e g . appliance energy efficiency
standards, fuel economy standards) that mandate an effect on the products offered in
such cases, the effects of the label on the producer cannot be separated from the
effects of the standards.
The discussions in the sections below reveal that consumers are usually aware
of labels and believe they are a good idea. However, it is very difficult to measure the
impact of labels on purchase behavior independent of other factors. Usually the
strongest statement that can be made is that a labeling program is (or is not) effective in
changing consumer behavior, together with its accompanying media program and other
efforts. The independent effects of the label cannot typically be measured.
Food and Nutrition Labeling
The Food and Drug Administration (FDA) has jurisdiction over food safety and
ingredient disclosure. The FDA has implemented two kinds of labels on food products:
safety warnings and nutritional information. This section will describe the purposes and
effectiveness of both kinds of labeling programs.
Purpmift flf flafftlY laftftls
Safety labels are used when the FDA and Congress determine that the danger
from a food substance or additive is not severe enough to justify banning the use of the
product outright, but is significant enough to warrant notifying the public of its possible
dangers.
One example of a product with a safety warning is saccharin. According to the
NIAAA report, the FDA proposed banning it in 1977, after a Canadian study found
evidence that saccharin caused cancer in rats. After receiving a strongly negative
response from the public. Congress implemented an 18-month study period, during
which foods containing saccharin were to be deariy labeled. The label reads "Use of
this product may be hazardous to your health. This product contains saccharin which
has been determined to cause cancer in laboratory animals." At the end of the study
period, it was decided that a ban was unnecessary and the warning label has been
continued.
Effectiveness of Safety Labels
Schucker, Stokes, Stewart and Henderson (1983) analyzed time series data on
diet soft drink purchases before and after the FDA proposed banning saccharin and
Congress required warning labels. Their analysis showed that warning labels had a
statistically significant impact on sales of diet soft drinks. Demographic analysis showed
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mat twe warning -abei had tne greatest effect on college-educated house-o^ds w;-
"¦9't c'e = *e5' ^"ec; c.n. "c-sencias witn young chiiaren Since coiiege-ec-ca'ec
"cuse^c cs account for a Cisoroport.onateiy large snare of ciet sort cnn< c^rc-ases -¦=
ejects of me .va'mng laoei on this group were magnified somewnat m tne overaii ejects
of the laoei The authors pomt out that the conclusions of the study are limited oy tne
restricted amount of data available, which allowed neither an extensive study of the pre-
warnmg baseline purchase habits nor a conclusive study of the length of the label
effects
Orwin, Schucker and Stokes conducted a later study in which they concluded
that sales of diet soft drinks had been significantly reduced for a period of several years
by the combination of publicity and warning labels. Their analysis shows that the eflects
of the publicity were much greater than the effects of the warning label, but they
emphasize the difficulty of separating the eflects of the two.
Purpose of Nutntion Labels
FOA involvement in nutritional labeling of food products began in 1969, after a
White House Conference on Food, Nutntion and Health report stated that malnutrition
was extensive in the U.S. The report identified a lack of nutritional information, rather
than an unavailability of nutntious food, as a major contributor to the malnutrition of U.S.
consumers. In 1973, after a penod of research, FOA announced final regulations
effective July 1975 that required a nutrition label on some packaged food products. The
label was necessary if a nutntion claim was made for the product in advertising or on the
package, or if the product was fortified with additional nutrients.
The regulations require the following format for the labet:
An upper section with information about serving size, calones, fat.
protein and carbohydrates
A lower section with information on the percentage of the U.S.
Recommended Daily Allowances (ROA) provided by one serving of
the product for up to 20 nutnents.
Since the beginning of the labeling program, other information has been added to
product labels, including information on sodium content and information on the presence
of substances that cause strong allergic reactions in a significant fraction of the
population, such as Yellow Oye No. 5 (tartrazine).
Effectiveness of Nutrition Labels: Public Awareness and Acceptance
Public response to the concept of nutntion labels has been very positive from the
start. Lenahan et al. (1973) studied a test nutritional labeling program conducted before
the FOA requirements were announced. The results of the study indicated that 96.5
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percent of the respondents approved of the idea of a nutntional labeling program, and
50 9 percent said that they would use the labels at least occasionally Two months
the test, 26 3 percent of respondents had noticed the labels 16 2 percent jraerstoc-c
them and 9 2 percent said they had used the labels at least once In addition,
respondents reported that they perceived benefits from labels even if they did not
actually report using the labels Consumers responded strongly that they believed
nutntion labels would
encourage the food industry to offer more nutritious foods,
cause the food industry to begin to advertise on the basis of nutntion,
which would increase public awareness of nutntion issues,
generally increase public confidence in the food industry, and
satisfy the public's basic right to know.
Daly (1976) found similar positive attitudes toward nutrition labels among
households in New York. In this study, 91 percent of the respondents agreed with the
need for nutrition labels, and 89 percent said that nutrition labels would increase their
confidence in the food industry. The greatest potential problem with actual use of the
labels was that although 90 percent of the respondents said that they would use
nutrition labels, the percentages of respondents actually demonstrating a sufficiently
high familiarity with nutritional concepts and the necessary mathematics were much
lower.
Effectiveness of Nutrition Labels: Measurable Changes in Purchase Behavior
The effects of the nutritional labeling requirement are hard to quantify. There has
not been a nationwide survey of malnutrition conducted since the labeling began that
could be compared to the report that started the labeling effort Self-reporting surveys
of consumers indicate that about 50 percent of consumers use labels occasionally
(Jacoby et al.. 1977). Consumer researchers generally agree that actual use is
probably much lower.
The strongest effect has been on the purchases of products containing
components perceived to be "negative" such as sugar, fat. or sodium. A1981 report by
Putnam and Weimer found that 2/3 of the consumers surveyed reported making a
recent change in food consumption, and of those, 9 out of 10 said that the change was
to reduce negative food components. A1986 study conducted by Russo et al. found
that posting summary nutritional information for "positive" or beneficial ingredients had
no significant impact on food purchases, but that summaries of "negative" or detrimental
ingredients had significant impact. The impact tfsappeared once the summary displays
were removed from the store.
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In the specific case of sodium, a 1983 telephone survey conducted for the FDA
found that 49 percent of respondents report that they had purchased products labeled
"low sodium" or "salt 'ree " People wno had medical reasons to limit their sodium
consumDtion were much more likely to read sodium labels than were peopie who 'e<-.
concern aoout sodium Age, income and education all affected the use of sodium
information
Events of the last few years suggest that, in addition to shifting purchases away
from negative substances, people are also willing to buy a beneficial substance that
they believe will reduce the effects of a detnmental one. Spurred by nutntional research
such as the National Cancer Institute study linking wheat bran with reduced nsk of colon
cancer, sales of cereal have risen 22 percent since 1987 (Business Week. 1989).
Studies that attempt to determine what information consumers actually obtain
when making a purchase decision support the contention that nutritional labeling is rot
having much effect on consumer purchases. The 1977 Jacoby et al. study of
information acquisition found that the percent of consumers acquiring some form of
nutntion information ranged from a high of 21 percent for calorie information to a low of
2 percent for fat content. When consumers were not provided wtth brand information,
the percentages increased, but not substantially. The authors of the study emphasize
that these results were obtained with the abnormal condition of shopping for a single
product; when a more typical shopping trip of twelve products was simulated,
information acquisition dropped by more than 50 percent. The authors of the study
estimate that an information acquisition rate of 10 percent is probably the real world
case.
Research indicates that education and income are the best predictors of nutntion
label use, with age also playing a role (Jacoby et al.. 1977; Hadden, 1986).
Problems with Nutfffiftn I ahals
Extensive research has been done to determine why nutrition labels are
infrequently used, and to see whether alternative nutrition information formats increase
the use of nutrition information. The main theories are:
consumers think that comparing the nutrition labels on all products in a
given category is too time-consuming;
consumers do not have the necessary skills and/or background
information to use nutrition labels effectively;
consumers do not perceive a need for nutrition information.
The following paragraphs contain details of the research that leads to these theones
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The task of reading and comparing nutntion label information for all products m a
product class appears to be too troublesome for most consumers Russo et al M975,
comoared the results of several studies, including their own, some studies tr.ed to
¦ ncrease nutritional awareness and some tned to reduce the effort required to make
nutritional compansons across brands They found that nutritional awareness
programs, such as the National Heart. Lung and Blood Institute study in 1983, do not
change shoppers' purchases, while effort reducing programs, such as one of the Russo
et al. experiments and the Muller 1982 study, do change shopping practices. They
concluded, therefore, that nutntion labels do not work because the effort required is too
great.
Levy et al. (1985) tested an alternative format to the standard nutrition labels.
They conducted a survey in Washington, D.C., and Baltimore. MO, in which shelf labels
were used to identify food items with low calorie, sodium, cholesterol, or fat content.
Purchases of labeled products were tracked over a two-year period, and compared to
purchases of the same products in stores without shelf labels. Sales of the tracked
products rose between 4 and 8 percent more in the stores with labels than in the stores
without labels. Furthermore, the effect was fairly constant over the two-year period;
changes in purchases were not restricted to the brief period at the beginning of the
program which was accompanied by a promotional media campaign.
The authors of the study suggest that the benefits of the shelf labels stemmed
primarily from their ability to stimulate a purchase response from those consumers who
were already interested in a special type of product, by reducing the amount of effort
needed to act upon that interest.
Even when consumers do take the time to look at nutrition labels, studies show
that many of them do not understand the information provided well enough to make
better product choices. Jacoby et al. (1977) tested the ability of consumers to use the
information contained in a typical nutrition label. Only hal* of the respondents
understood that nutrition information was provided in terms of a single serving rather
than in terms of the entire package. The ability to reasonably define calories,
carbohydrates, fat and protein was also low; the high was a 26 percent ability to define
calories, while the low was a 4 percent ability to define fat (The standard for
"reasonably define" was that the answer had to correspond fairty well to definitions
provided in nutrition pamphlets written for the general public.) Fewer than 20 percent
could give any estimate of the carbohydrates, fat. or protein needed daily by an average
adult.
The idea that an inability to comprehend nutrition labels may restrict their use is
further supported by data indteaiing that nutrition label users are mors likely to
understand the labels than are non-users. Daly (1981) conducted a survey of the
household major food shoppers. Among those respondents who self-reported that they
use nutrition labels, 74.5 percent were able to correctly answer a multiple choice
question deriving the amount of a product that would provide the 1UH U.S. ROA of a
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nutnent Among those respondents who reported that they do not use nutrition laoe's
only 49 7 percent answered the same question correctly
Finally, many consumers do not appear to be convinced that they need to '_se
nutrition labels Daly (1981 > surveyed self-reported reasons for non-use among
respondents who report that they do not use nutntion labels The most commonly
reported reason for non-use was "I trust my ability to select nutntious foods without
using the label information," with which 79 percent of respondents agreed Other
"shopping practice" reasons, such as lack of time and reliance on brand-name products,
were also chosen by 30 percent or more of the respondents. No more than 18 percent
agreed with reasons having to do with perceived inabilities to read or comprehend the
nutntion label.
Feick et ai. (1986) suggests that consumers do not use nutntion labels
extensively because they acquire substantial amounts of information from sources such
as magazines, television, conversation with other consumers, books, pamphlets, and a
lifetime of expenence.
In contrast, consumers do appear willing and able to change their purchases
when they are convinced that some particular food substance is important to their
health. After the publicizing of evidence that oat bran may lower levels of blood
cholesterol, consumers have purchased 70 percent more cereals containing oat bran; a
survey of Pepsi drinkers even found that 74 percent reportedly would switch to Coke if it
contained oat bran (Business Week, 1989). These food fads can also be explained by
other theones discussed earlier in this section. The publicity and promotion of the
"nutrient of the month" help to reduce the amount of effort required to obtain, and act
upon, nutrition information.
Formal research on the effects of nutrition labels on producers is much less
available than consumer research; therefore, we cannot answer the question of whether
nutntion labels have caused food manufacturers to reformulate their products. In recent
months, examples of food product reformulations have been widely publicized. In
response to concerns about cholesterol, cereal manufacturers reformulated products
containing tropical oils. Manufacturers of many types of foods have added oat bran to
the ingredents in response to public demand. However, these actions occurred mainly
in response to media publicity that was spurred by medical research, not by labeling.
Household Appliance Energy Efficiency Labeling
Background of Energy Efficiency Labels
By federal law, labels are affixed to home appliances showing the energy
consumption of the appliance. This program was preceded by a voluntary labeling
program housed in the Department of Commerce's National Bureau of Standards; the
voluntary program was in effect from 1973 through 1975. Air conditioners were the first
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appliances to be labeled in this program, and voluntary participation was high in
December 1975, Congress passed the Energy Policy and Conservation Act ;EPCA)
whicn attempts to improve me efficiency ot nome apoliances Dy requ. r e*"ergy s
Tne Federal Trade Commission was given responsibility for establisnmg tne format z<
the labels, while the Department of Energy (then Federal Energy Administration) was
given responsibility for a consumer education program to complement the labeling
program (McNeill, Wilkie 1979; DOE 1980)
EPCA proposed that the energy labels should disclose the average annual
dollars of energy use for the appliance and a comparison with similar models. The FTC
proceeded to design a set of preliminary labels, which were announced in 1978. These
labels were altered and final labels were announced in 1979. Although the labels vary
for different types of appliances, they typically contain:
the estimated yearly cost to operate the appliance, based on the
national average electric rate ($/kWh)
the estimated yearly cost to operate the most and least efficient similar
models
a table showing the estimated yearly cost to operate the appliance for
varying electric rates ($/kWh), and varying usage habits.
Much research was done before and after their introduction. The sections below
summarize the results on the public awareness and acceptance of the labels, and on
the measurable impact of the labels.
Effectiveness of Energy Labels: Public Awareness and Acceptance
According to 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
surveyed in Western Canada believed that consumers would find energy labels useful.
A study for the FTC in 1977, to help them design the U.S.'s energy labels, found that the
subset ot consumers who sought and used energy information preferred detailed
information.
Surveys also show that American consumers at that time were definitely aware
of. and concerned about the energy crisis and conservation. However, surveys
conducted in the late 1970's (prior to the introduction of the energy labels) showed that
consumers ranked "energy use" and "cost to operate" quite low on the list of attributes
they consider when choosing an appliance to purchase. Thus, to change consumers'
purchase behavior, the labels would have to not only make consumers aware of energy-
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and cost-efficient appliances, but also change their values for them It was hoped tra:
fhe dual labeimg-educational effort would help serve this purpose
Effectiveness of Energy Labels Measurable Effects and Problems
In 1976, just after the passage of EPCA, DOE (then FEA) studied the feasibility
and likely effects of the labeling and education program. A study by Human Sciences
Research reviewed past labeling programs, assessed the effectiveness of the proposed
program, and proposed educational and informational activities.
To study the potential effectiveness of the labeling program, they interviewed
about 100 consumers who were shopping for refrigerator-freezers. They separated
these subjects into three groups and subjected them to three levels of treatment:
no information relevant to their purchase;
an "Energy Guide" label (not the same one that was eventually
adopted); and
an "Energy Guide" label in addition to an educational/persuasive
pamphlet and 15-minute audio-visual presentation.
The researchers tracked the purchases that the subjects eventually made. They
found that the third level of treatment, where the most information was supplied, caused
the subjects to purchase significantly more energy-efficient refrigerator-freezers than the
other subjects. Moreover, the second level of treatment - the Energy Guide only did
not lead to a significant effect when compared to the subjects who were given no
information. The conclusion from this research was that the energy labels alone were
insufficient to cause behavioral changes; information programs were needed as well.
A later study for DOE (1980) sought to construct a baseline forecast of the effect
of the labeling and educational program on the main categories of appliances. Policy
Planning and Evaluation. Inc. studied this question from several approaches, and
conducted a pre-test of an advertising campaign to promote energy awareness. They
concluded that the labeling and education program would have only a slight influence on
purchases of (fishwashers, electric furnaces, and clothes washers; a moderate influence
on purchases of refrigerators, refrigerator-freezers, freezers, central air conditioners,
room air oontftioners, gas furnaces, and water heaters; and a major influence on
purchases of ofl furnaces.
McNeill and Wilkie (1979) studied the overall effect of the energy labels and the
relative effects of different formats for the labels. As in earlier studies, they chose
refrigerator-freezers as the product to be used in the experiment Their research
subjects consisted of 180 women in the Gainesville, Florida area. Subjects received
varying levels and types of information on four refrigerator models and were given a
senes of information acquisition and recall tasks. The researchers found that the
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subjects did read and recall the energy labels, especially with regard to one mgniy
inefficient model However, the results did not suggest that the energy labels wo^o
sigr.ficantly influence ourcnase behavior The study also found tnat tre _nns _sec
disclosing information on the labels (e g . dollars per year versus dollars oer morun
made little or no difference
Anderson and Claxton (1982) also studied the empirical effect on energy labels
on consumers" choice of refrigerator; their research took place in Western Canada.
They vaned the type of information given on the label as well as the level of energy
information given by the sales staff in the department stores. They found that the
energy information had a significant impact on the purchases of small energy efficient
refrigerators, but no impact on the purchases of large refrigerators. They also
concluded that the sales staff were not as convincing as they could have been in
encouraging consumers to consider energy efficiency. The sales staff increased the
awareness of the energy labels, but did not influence choice.
In 1985, a study was conducted for Bonneville Power Administration (8PA) on
consumer response to the energy labels and other incentives to purchase more efficient
appliances. The study, which was conducted as part of the preparations for a BPA
promotion of energy-efficient appliances, involved telephone interviews with retailers,
manufacturers, and energy efficiency experts. It concluded (among other results) that
the Energy Guide labels may help raise consumer awareness of energy efficiency
issues, but they do not change consumer purchase behavior. Respondents to the study
concluded almost without exception that the labels were hard to read and interpret,
reported costs that may be incorrect because they are based on national average
electric rates, and were not updated often enough.
Bonneville subsequently designed and tested a program called Blue Clue. The
program awards a large, attractive blue ribbon to refrigerators that are in the top 15% of
efficiency in their size and function class. Efficiency measures are based on the same
data used by the FTC for the energy labels, but use a standard OOE method to
calculate the energy efficiency rating considering other factors in addition to annual
operating costs.
The program is voluntary ; appliance retailers (not manufacturers) place the
ribbon on the products. Over 75 utilities in Bonneville's service territory are participating
as well as several utilities in the Northeast. Bonneville considers the program to be a
success. The program has generated a great deal of interest by other utilities,
especially in the Northeast where several are adopting similar programs. However,
there have been no conclusive follow-up studies to assess the effectiveness of the Blue
Clue label.
The California Energy Commission (CEC) conducts research on the efficiency of
appliances used in California and on the factors that affect the demand for energy
efficiency in California. CEC's Conservation Report (1988) summarizes recent research
in this area and makes several points and assertions:
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Residential consumers' demand for more energy-efficient homes and
appliances nas increased m the last decade (increasing this demana is
one of the respons.bilities of the CEC) but should be increased further
There is a large difference between the average efficiency of
residential appliances in California and the maximum efficiency
available, thus there is high "technical potential" for increasing
consumer energy savings.
One important factor determining demand for energy efficiency is
packaging; the FTC energy labels on appliances have been shown to
be confusing and are used by less than half of appliance shoppers.
Simpler energy labels that concentrate on a few key concepts would be
more useful to consumers than the current labels.
The information on the labels is often quickly outdated.
These conclusions are consistent with other researchers' criticisms of the energy
efficiency labels, including Bonneville's. A conversation with Michael Messenger of the
CEC, who is very familiar with research in this area, further confirmed some of the
perceived problems with the labels. Researchers have continued to find, in recent
years, that consumers often do not understand or use the cost information shown on the
labels. One California utility conducted group interviews about consumers'
understanding of the labels and discovered that about half of the participants severely
misunderstood the information on the labels. The CEC report also states that the
federal government is considering making changes to the energy labels, but
unfortunately has no plans to market-test the new designs.
The information supplied by BPA, the CEC, and others shows that the traditional
energy labeling program (Energy Guide) has not been particularly effective in either
communicating energy information or changing behavior. This is not a surprising result
given that even the pre-tests of the program suggested that it would have little effect,
and that the markets for energy and electricity have softened considerably since the
labels were introduced. Bonneville's energy efficiency labeling program has been
tested, but not at the national level, and hard data are not available as to its
effectiveness.
To summarize research in the area of energy labels for appliances, it seems that
the Energy Guide labels were seen as a good idea and potentially useful when they
were first introduced, but they have not had much impact on consumer purchases.
Research suggests many possible reasons for this, induing:
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The labels are relatively complex and may not be understood by some
consumers, they might be much more effective if they were simpler
ana/or more eye-catching (like the targe onght Blue Clue label)
The labels emphasize the cost to operate the appliance, wmch is only
one of many attnbutes consumers consider when making a purchase
decision
The cost to operate the appliance may be small compared to the cost
to purchase the appliance.
The cost to operate the appliance is likely to be incorrect due to
regional differences, and is not updated often enough.
The labels are much more likely to be used when combined with a
program to educate and inform consumers about energy conservation;
such a program was conducted several years ago. but conservation
ceased to be a primary objective of the federal government when
energy prices dropped and demand growth slowed.
During the period of time since the energy labels were first introduced, the
average efficiencies of appliances have increased. This phenomenon is due in large
part to the appliance energy efficiency standards that have been imposed at the state
and national levels (California was the early leader in this area), and can also be
attributed to certain electric utility incentive programs. Thus, producers have been
forced to improve the efficiency of their appliances. We have not tfscovered research
results that tie changes in producer behavior to the energy labels.
Automobile Fuel Economy Labeling
Background of Automobile Fuel Economy Labeling
In 1973, the oil embargo and accompanying national concern prompted EPA to
begin a voluntary Federal Fuel Economy Information Program, consisting of a Gas
Mileage Guide and Fuel Economy Labels. The program was intended to increase
public awareness of factors thai affect fuel economy, encourage manufacturers to
improve the fuel economy of their products, and influence consumer purchases in the
direction of improved liiel economy. EPA provided estimates of fuel economy for 1974
model year vehicles in the Gas Mleage Guide, which automobile dealers voluntarily
displayed in their showrooms. The fuel economy results were based on city driving
only.
By 1975, EPA had also developed estimates of highway-driving fuel economy for
new automobiles. These were published, along with the city-driving estimates, in the
Gas KAIeage Guide and also on Fuel Economy Labels which were placed directly on
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vehicles The program was still voluntary At this time, automobile manufacturers
began using the EPA fuel economy ratings, as well as their own estimates of fuel
economy .n their advertising This caused substantial confusion among cons^-s-s
Decemoer 1975, Congress passed the Energy Policy and Conservation Act (EPCA;
wmch established corporate average fuel economy (CAFE) standards for passenger
cars for 1978-80 and 1985 The Ad also made mandatory the display of the Gas
Mileage Guide in showrooms and the use of the Fuel Economy Label on cars, effective
for the 1977 model year.
The labels used on the 1977 and 1978 model year vehicles were changed to
include estimates of city, highway, and combined fuel economy values. Vanous other
changes were also made to the format and content of the labels and the Gas Mileage
Guides dunng this penod. In 1979, EPA changed the content of the labels again, to
display only an estimated fuel economy rating based on the city-driving measurements.
In 1980, EPA published an Advance Notice of Proposed Rulemaking to improve
the labeling program by once again including both city and highway ratings, and
adjusting them downward to better reflect actual driving conditions. This change was
eventually approved and adopted for model years 1985 and later. Several other
changes to the label format were also made, starting with the 1985 model year.
Effectiveness of Automobile Fuel Economy Labeling
Several surveys were conducted at various stages of the Federal Fuel Economy
Information Program to assess consumer awareness and use of the Gas Mleage Guide
and the Fuel Economy Labels. In February 1976, Abt Associates conducted such a
study for the Federal Energy Administration. They found that 53% of the 796 owners of
1976 model vehicles had seen the fuel economy label on the vehicle they bought.
However, only 7% were aware of the Gas Mileage Guide. Buyers aware of the Fuel
Economy Information Program (72%) increased their gas mileage by 20% when
replacing their older vehicles, while unaware buyers increased their gas mileage by an
insignificant amount (less than 1%).
Later surveys found that awareness of the Guide and the Label had increased. A
1981 survey for the Department of Energy found that 80% of new car buyers saw the
labels on the cars, and 30% saw the Gas Mileage Guide.
While consumers were aware of the fuel economy labels, they often did not trust
the information the labels presented. EPA made many changes to the content of the
labels from 1974 through 1985, partly in response to criticism from consumers,
automobile manufacturers, and other government agencies. The main criticism of the
Fuel Economy Information Program was that the fuel economy ratings did not reflect
true driving conditions and tended to overestimate fuel economy. The EPA ratings were
obtained not through road tests, but by measuring the carbon content of the exhaust
from the automobiles under controlled conditions. No adjustments were made to reflect
differences in type of tires, driving habits, road surfaces, or other variables. A survey by
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the Department of Energy in 1981 found distrust of the EPA ratings to be the mam
reason why some auto buyers did not use them
Average fuel economy of cars improved and demand for fuel drooped between
1973 and 1981, which suggests that the Fuel Economy Information Program was
successful m meeting its objectives. However, the program was conducted concurrently
with several related energy conservation efforts. A 55-mile-per-hour speed limit was
established in January 1974. The CAFE standards were enacted and enforced. In
1978, the "gas guzzler" tax was established.
Other factors also contributed to the improvement in automobile fuel economy
and the drop in demand for fuel. Automobile manufacturers used fuel economy ratings
heavily in their advertising, contributing further to consumer awareness of the issue.
Finally, fuel prices were volatile and rose substantially between 1973 and 1981. The
improvement in the fuel economy of cars produced and purchased cannot be attributed
solely or primarily to the labels. As with other successful labeling programs, the
success must be attributed to the information program as a whole, as well as economic
conditions.
To summarize, EPA experienced some difficulties in implementing the labeling
and Gas Mileage Guide components of the Federal Fuel Economy Information Program.
The main difficulty, which led to the label format being revised several times, was that
consumers mistrusted the fuel economy ratings and manufacturers objected to them;
they did not reflect actual driving conditions and tended to overestimate gas mileage.
Oespite these problems (or perhaps because of them), consumers were quite aware of
the Fuel Economy Labels and of the overall program. These and several other
important factors led to a substantial national improvement in automobile fuel economy
and in conservation. No study has been attempted (or is likely to be feasible) for
separating the effects of the Fuel Economy Label from the other factors. In fact, such a
study would probably be impossible.
Cigarette Labeling
Background of Ctaaratta Labels
In 1964, the Surgeon General's Report on Smoking and Health established the
first official relationship between cigarette smoking and lung and heart disease.
Congress responded by requiring that beginning in 1965, a mild health warning be
placed on cigarette packages: "Caution: Cigarette Smoking May Be Haiardous to Your
Health." In 1970, the Public Health Cigarette Smoking Act strengthened the health
warning, requiring that cigarette packages cany a new wanting: "Warning: The
Surgeon General Has Determined that Cigarette Smoking is Oangerousto Your Health."
These new labels were adopted in 1972. Also in 1972, the FTC required that the
warnings appear not only on cigarette packages, but on cigarette advertisements as
well.
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From 1968 until 1970. anti-smoking commercials were atred on radio and
televis.on stations in a ratio of about one anti-smoking commercial for every four
ogarene commercials In 1971. cigarette commercials were banned from radio and
television under the Public Health Cigarette Smoking Act
By the early 1980's, the FTC had concluded that the cigarette warning label (for
both packaging and advertising) was no longer effective. In 1984 it developed a
quarterly rotating senes of four new, more specific warning labels. These were put into
effect under federal law in October 1985.
Effectiveness of Cgym »,abels Before 19B5
Many studies assessed the effectiveness of the original cigarette label that was
used prior to 1985. However, these studies typically have not been able to isolate the
effects of the warning labels from the effects of the advertising warnings and other
public education efforts. The NIAAA literature review describes several of these
studies.
Studies conducted in 1973,1974, and 1977 examined cigarette consumption
patterns and concluded that health publicity since 1964 had significantly affected
consumption. Each of these studies also concluded that the effects could be attributed
to the 1968-1970 anti-smoking commercials. A 1981 study concluded that the 1964
Surgeon General's report and the anti-smoking commercials had both had a maior
impact on cigarette consumption.
In a 1975 report, the FTC stated that the warning label was only one of many
efforts to educate the public about the dangers of smoking, and also that women's and
young people's cigarette use had actually increased.
Another FTC staff report (1979) described results of a statistical analysis of a
large database developed by the Centers for Disease Control (CDC). The database
contained information on the smoking histories of 12,000 adults. The study confirmed
previous assertions: per capita smoking by 1975 had fallen by 34% below levels that
would have been projected from data collected prior to 1964. However, the response to
the publicity was gradual, and the study found no evidence that the anti-smoking
commercials had a significant, isolated effect.
The study also revealed that the percentage of people who smoked had dedmed.
but the number of cigarettes consumed per smoker had not. Finally, the percentage of
females aged 12-16 who began smoking each year actually increased from 1964 to
1975. Like previous studies, the study was not able to isolate the effects of the warning
labels from other effects.
According to the NIAAA report, several other studies in the early 1980's
examined the effectiveness of anti-smoking legislation and labeling in other countries.
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including Norway, Finland, and Sweden These studies also could not separate the
effects of health warnings from the effects of the concurrent broader information
campaigns Only two studies attempted to examine the eflects of cigarette warnmg
labels m isolation from other efforts These were a staff report published by the FTC in
1981 and a Swedisn study of the impact of Sweden's rotating warning labels
The FTC report concluded that the 1970 cigarette warnings were not effective
and did not provide corisumBrs with adequate information. This conclusion was based
solely on measures of consumer awareness of the warnings and their content;
according to the FTC, many smokers were still unaware of the dangers of smoking, and
the warning labels were neither noticed nor read by the majority of people.
The FTC cited four factors to explain why they believed the existing warning label
was ineffective:
The label was overexposed and worn out
The warning presented no new information
The warning was too abstract and difficult to "visualize"
The warning was not likely to be perceived as "personally relevant"
The FTC tested several options for replacing the warning label. It also conducted
market research to test consumer recall of different sizes and shapes of warning
messages. The FTC finally recommended a new rotating system of lour warning labels.
These were in effect as of October 1985. However, the FTC did not market-test the
new labels before they went into effect.
The effects of the pre-1985 warning labels in the U.S. can be summarized as
follows. While the combined effect of the warning labels, the Surgeon General's report,
the anti-smoking commercials and other informational campaigns reduced the
percentage of smokers, the separate effects of the cigarette package labels and the
other efforts cannot be determined. Despite evidence of the success of the overall
program, the FTC was not satisfied with the warning labels based on measures of their
effect on consumer awareness.
The study of Sweetish warning labels, which were established in 1977, involved
interviews with 2,000 people before the warnings were introduced, and again one year
after their introduction. The study found that there was a significant increase in the
percentage of respondents who were aware of the specific health risks described in the
warnings. This increase was larger among smokers than among non-smokers. Also,
the overall prevalence of smoking declined, and the attitudes toward the labeling system
were positive.
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The Swedish study indicated that the laoeling program was a success in :erms a'
awa'eness. acceptance and Penavior changes However, the study DroDao'y cc -c*
cor-ote'eiy separate the effects of the 'abeis from the effects of other ecuca*icrai
efforts Also, the Swedish labeling system was quite complex, involving :6 aiHerent
laoeis that were changed every few years This makes it difficult to compare to tne U S
program
Effectiveness of Cigarette Labels since 1985
One study is available that evaluates the new system of four rotating warning
labels. Beltrammi (1988) measured the beiievability of the new labels and the traditional
label by surveying 727 university students. He used ten different beiievability scales,
each measured on a five-point interval scale, to assess the overall believabtlity of the
five labels. The traditional label scored the highest on average beiievability, and there
were significant differences between its beiievability and the beiievability of the other
four labels. However, all were perceived as fairly believable on average.
Beltrammi also examined differences in beiievability results for different segments
of the respondents. He found, among other things, that the beiievability ratings were
essentially the same for smokers and for non-smokers. Although this study tested the
potential acceptance of the new warning labels, it did not measure consumer awareness
or changes in behavior.
Drug and Chemical Labeling
In this section, we briefly describe results on effectiveness of drug and chemical
labeling. Most of the information in this section is abstracted from the NIAAA report.
Pryq Labeling
Drug labeling has been regulated since 1906 and has evolved through several
stages. Drugs are now classified as either over-the-counter (OTC) or prescription. OTC
drug labels must list several pieces of information, such as the names and quantities of
active ingredients, directions for use, and potential risky side effects. The FDA is
responsible for classifying OTC drugs, ensunng their safety and effectiveness, and
reviewing the labels.
For prescription drugs, the labeling is less comprehensive. It is assumed that a
physician's advice and treatment will include information on the drug. However, patient
package inserts (PPI's) are required for certain types of drugs, most notably oral
contraceptives. The research on drug labels addresses three issues:
Do people read OTC drug labels and PPI's?
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Do people understand the information'?
Does the information affect their benaviorwith regard to tne arug7
Two major studies have addressed the comprehensibihty of OTC drug warning
labels. Both concluded that the level of presentation of the information (detailed versus
simple) had no effect on the user's comprehension of the label. This result differs from
conclusions for other product areas; simple information is generally regarded as easier
to understand. The authors of one of the studies concluded that consumers can infer
the basic message of a drug warning label despite the presence of complex information.
Many studies have addressed the effectiveness of PPt's for prescription drugs.
The first such research focused on the PPI's included with oral contraceptives. A 1977
study found high self-reported awareness and usage of the PPI. Reca: of the
information in the PPI was also fairly good; for example, 69 percent of respondents
correctly recalled usage directions, and 50 percent recalled information on the common
reactions to the drug.
Several subsequent studies focused on the effects of the length and content of
the PPI's on consumers' comprehension and learning. The studies generally concluded
that the majority of consumers read and understand PPI's. find them useful, and prefer
that they contain explicit and detailed information.
A few studies have tried to determine whether consumers change their behavior
as a result of reading PPI's. These have found no evidence to support behavior
change. In particular, a study commissioned by the FDA rejected an FDA concern that
if warned about possible side effects, patients would discontinue using a drug, return it
to the pharmacy, or report more side effects. The authors of the NIAAA report suggest
a very reasonable explanation; Patients generally trust their doctors and see no reason
to change their use of a drug because of a PPI. Another explanation is that sick people
want to get well, and do not have much choice as to whether to take a drug or which
one to take.
In 1972, the Consumer Protection Safety Act was passed and the Consumer
Protection Safety Commission was given the mandate to protect consumers from
unreasonable risk from products, other than products covered by other regulations
(such as drugs and food). The CPSC can use any of five levels of policy options to
control the risks associated with a product:
take no action
use a voluntary industry standard
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require a mandatory design standard
'equtre a laoel or nazard warning
ban the product
A variety of household chemicals and other products have been labeled under
the fourth policy option above. In addition, the U.S. Department of Labor's Occupational
Safety and Health Administration (OSHA) has responsibility for labeling workplace
hazards, and the EPA has responsibility for labeling pesticides and toxic chemicals.
Below we bnefly summanze results on the effectiveness of labeling in these areas.
A 1986 study examined the effects of various warning labels for toilet bowl
cleaners and insect sprays on consumers' perception and understanding. The
researchers found that the provision of more information on the products' risks led to
more awareness of the risks, but at the expense of knowledge on how to use the
product. When the label was enlarged, there was a size threshold beyond which
consumers did not learn more. When the label was restructured into a logical sequence
of categories and subcategones of information, consumers could recall precautionary
information better.
Another 1966 study investigated the effects of various formats of warning labels
on products including drain cleaners. The experiments found that re-wording and re-
organizing labels can have a dramatic effect on the understanding of risk, and that
comprehensive, clearly presented labels are better for teaching consumers about
specific safety measures.
Other studies on consumer product safety warnings have found that larger safety
labels sometimes lead to increased perceptions of risk, and conversely that the size of
the warning and the inclusion of words such as "Danger" or "Caution" make no
difference in perceptions of risk. A slightly different category of research studies have
examined consumer reactions to product warning labels and concluded that people's
preconception of the risk associated with a product has a stronger impact on their
perceptions than does a warning label.
These studies all investigated the ability of warning labels to deliver risk
information, but did not examine whether they cause consumers to change their
behavior. However, one 1984 study tested workers' responses to hypothetical changes
m the risk situations in their workplace. The study concluded that when workers were
given the opportunity to read a warning label for a chemical with which they would be
working, they revised their assessments of the risk they would be taking on the job. The
more risky the chemical, the more workers were fikeiy to state that they would expect
additional pay in compensation tor the additional risk, and that they would prefer to be
transferred to a job involving less hazardous chemicals.
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Seals and Certifications
Our research uncovered a large number of articles ana reports on general
labeling issues, m addition to specific types of product labeling Some of tms research
investigates the extent to which consumers notice and use seals and certifications when
they choose products. Examples of seals and certifications are the "U S 0 A. Choice"
meat label and the Good Housekeeping Seal. These are both "third-party" seals; they
are awarded by an agency other than the company that makes the product. Other seals
and certifications are "self-awarded" by the manufacturer; an example is the Monsanto
"Wear-Dated" label.
The consensus of the research on these seals and certifications is that
consumers notice them and consider them an important source of information on the
product. Third-party seals and certifications enjoy the highest recognition. However,
researchers also agree that consumers frequently attribute more meaning to the seals
and certifications than actually exists. Below we summarize the most relevant articles
we found on the effectiveness of seals and certifications. In the second subsection we
descnbe a new third-party seal, the American Heart Association's HeartGuide.
Effectiveness of Seals and Certifications
Jacoby et at. (1977) examined the amount and type of information that
consumers acquire about alternative products before they make a purchase decision.
The study subjects were 84 female college students; they were asked to choose, one by
one, the categories of information they would need in order to make a purchase
decision about toothpaste. Although the main result of the study was that brand name
and price were the most important attributes of toothpaste, the study also found that the
presence or absence of the American Dental Association seal was the most important
piece of information following brand, price, size, and flavor. Information about the
presence of the Good Housekeeping Seal was also requested by many subjects.
Parkinson (1979) thoroughly studied the extent to which consumers recognize,
understand, and use nine seals and certifications, including the Good Housekeeping
Seal, U.S.O.A. Choice, Parents' Magazine, Monsanto Wear-Dated, and Underwriters'
Laboratory. The research subjects were 198 adult women in Delaware. These five
seals received the highest levels of recognition; in each case, at least 85% of the
subjects indicated that they had seen the seal before. All these seals are third-party
seals except Monsanto Wear-Dated. One caveat to the high levels of recognition was
that a fictitious seat was included in the study, and 20% of the subjects mistakenly
indicated that they had seen it before.
Parkinson also conducted a simulated shopping experiment and concluded that
the presence of the third-party seals (especially Good Housekeeping, U.S.D.A. Choice,
and Underwriters' Laboratory) had a positive influence on product choice. He also
concluded that, while these best-known seals have an impact on perceptions of the
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product, they do not convey different types of information, all the familiar seals have a
oosiiive but generic effect Finally, Parkinson found that consumers cverestimafe '~e
~eanrg cr tne seals For example, many think tne seais mean tne prcc^ct .s "*cS"ec oy
Consumer Reports" or "government-approved" when it is not
Lane and Sarel (1981) studied consumers' misperceptions of the Good
Housekeeping Seal in 1972 and again in 1980. Their research subjects were screened
to include only people who were familiar with the Good Housekeeping Seal and who
had read at least one Good Housekeeping Magazine in the past six months. Therefore,
their results on the subjects' use of the seal cannot be extended to the general
population. Their main result was that consumers misperceived the meaning of the seal
in both years of the study. For example, the majonty thought that the seal meant that
the product meets federal safety standards, which is not necessanly true.
LaBarbera (1982) interviewed 180 college students to study vanous ways that
companies can improve their credibility and reputation in a product category. Adhesive
bandage strips were used for the study. The study found that adding a statement to the
advertising saying that "the brand's effectiveness had been tested and approved by the
Amencan Medical Association" had a significant positive effect on the product's
perceived credibility and the consumers' intent to purchase the product.
Amencan Heart Association's HeartGuide
The Amencan Heart Association is in the final stages of preparing a program to
offer a seal of approval to foods that contribute to a "heart healthy" diet. The AHA
program will use its own standards, first set in 1961, for total daily allowances of four
food elements: saturated fat. total fat, sodium and cholesterol.
When a food product manufacturer applies for the program, the food product is
tested for its contents of the four elements in a single serving. A product that meets
AHA standards is given the right to use two HeartGuide label features:
The HeartGuide seal of approval. The seal appears on both the packaging
and advertising of the product.
Information on how the product contributes to the total daily
recommendations for the four food elements. This information appears m a
defined bar chart format on the package near the FDA-required nutntion
information.
The products will be tested by a network of independent contract laboratones.
which will test products purchased from retail outlets serviced by each manufactunng
facility producing the product. Each product sample will be tested by more than one
laboratory, to reduce testing errors. The laboratories mil continue to purchase and test
product samples throughout the contract period to monitor compliance.
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The license agreement for use of the HeartGuide seal lasts for three years arc
irc'udes provisions restricting the use of the seal m packaging and advertising ara
g vrg tne AHA the rignt to cancel tne agreement in the event of ncncorrpiiance A 'ee
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labeling programs that seem most relevant to an investigation of environment; '2c-
Tre er'ectiveness of a labeling orcgram can oe descnoed in ;er,~s cf ccr.s^~-='
a.va'="ess acceptance, ana cenav.orai impacts There are four cr2rac'5"3- C3
ccr;r.c^.;9 ;o the effectiveness at a laoe'mg program
charactenstics of the label
charactenstics of the product market
e charactenstics of the targeted consumer segments
charactenstics of the accompanying program efforts.
Below we briefly discuss each of these four conditions and make preliminary
observations on their impacts on the effectiveness of labels.
Charactenstics of the Label. There are many attnbutes of labels, including their
complexity, size, color, and specific content. With the possible exception of patient
package inserts, simpler labels are more effective than complex ones. Well-organized,
clearly wntten labels are more effective than labels that are harder to read. Bolder,
larger, and more colorful labels are more effective than dull ones. Labels are also more
effective if they do not contain a large number of attributes; for example, nutntion labels
contain information on many different aspects of food and a large amount of effort is
required to compare this information across several products. Labels should present
new information and information of relevance to the targeted consumer. There is some
evidence that labels warning of negative impacts are more effective than those that
claim positive impacts; however, recent developments in labeling and the media (e.g.,
oat bran) seem to contradict this. Finally, labels should not force consumers to perform
mathematical calculations (such as adding up percentages or computing monthly costs
from annual costs.)
Charactenstics of the Product Market. Products and product markets vary substantially
m their characteristics. Two factors that determine the effectiveness of a label in a
product category are the importance of the label compared to other attributes of the
product, and the availability of alternatives to the labeled product. For example,
attnbutes of refrigerators such as size and pnce are more important to consumers than
energy efficiency, even in times of energy shortages. Also, in some product markets the
effectiveness of a label cannot be measured in terms of behavior change. For example,
patient package inserts communicate useful information, but are not expected to cause
behavior changes, as there is usually no better substitute for a prescnption drug. At the
other extreme, with some products (e.g.. cigarettes), the effectiveness of the label is
measured in terms of how many consumers give up the product altogether.
Characteristics ol the Targeted Consumer Segments. Research indicates that before a
label is designed, thought should be given to the characteristics of the consumers who
will see it. Age, income level, and education level of a consumer all have a strong
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impact on the effect the label will have To understand complex labels, consumers may
need to have SDecial skills or education Finally, consumers must believe that ine
¦ nfor~a:.3n cr the laoel is Lseful ana relevant to them m particular, not just tc c
as a whcie
Characteristics of the Accompanying Program Efforts. It is typically difficult or
impossible to separate the effects of a label from the effects of the accompanying
government standards, consumer information programs and media campaigns.
Government standards may have an effect on the available products. The publicity that
accompanies a labeling program may have a dramatic effect on consumers; the most
successful labels have been accompanied by media campaigns. Much of the research
literature advises that labeling programs be market-tested before their launch. The
literature also suggests that the label and the other aspects of the program be vaned
overtime and across market segments in order to capture and hold consumers'
attention.
Our findings on labeling effectiveness are mixed. Consumer awareness of
labels, reported use of labels, and support for labels and seals are usually quite high.
However, understanding and recall of the details and meaning of the label information is
often low. Changes in consumer behavior can be small (as in the case of appliances),
but can be high when combined with media coverage and other factors (as in the cases
of cigarette smoking, and the current cholesterol/oat bran craze). Changes in producer
behavior, where they can be identified, are associated with other influencing factors
accompanying the labels, such as government standards or media publicity.
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CHAPTER 4
ANALYSIS AND RECOMMENDATIONS FOR A U.S.
ENVIRONMENTAL LABELING PROGRAM
Introduction
The previous two chapters summarize our findings on the current status of
environmental labeling programs outside the U.S., and the effectiveness of past and
present U.S. labeling programs. In this chapter, we draw upon the previous chapters,
as well as discussions with experts and interested individuals from a variety of
backgrounds, to answer the following questions:
Goals: What should the key goals of a U.S. environmental labeling program
be?
Functions: What functions must the program perform to meet its goals, and
how should they be performed?
Structure; What are the possible institutional structures for performing these
functions, and which should be adopted?
Next steps: What actions should be taken?
Much has been written about the various reasons for implementing an
environmental labeling program in other countries, and many individuals have strong
opinions about the feasibility, costs, and benefits of implementing such a program in the
U.S. The purpose of this chapter is not to argue in favor of such a program, or to justify
it in terms of costs and benefits. Instead, our objective is to develop the best possible
preliminary design for this entirely new program.
First, we describe the goals of the program. These are derived largely from
examining other countries' programs.
Second, the goals of the program suggest several key aspects of the program's
operation. These include selection of product categories and criteria, testing and
monitoring of products, publicity, financing, legal support, and label design. We discuss
these issues and recommend guidelines for operating the program. Our
recommendations are intended to provide a starting point for the design of the program,
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but not to provide definitive answers to the many detailed questions that should be
addressed by the program's management and/or decisionmakers
Third, we descnbe the organizational structure that should be adopted to oeform
the program functions, and the reasons for selecting this structure over others
Fourth, we conclude by identifying the next steps that should be taken if
environmental labeling is to be pursued. These steps include both "action items" and
further research. The immediate actions could be taken in parallel with the additional
research in order to expedite setting up the program.
Program Goals
In this section, we describe the basic goals of the environmental labeling
program. In addition, we suggest four performance criteria that should be given pnonty
in the design and operation of the program.
The goal of environmental programs in general is to reduce pollution and protect
the environment. The basic goal of the environmental labeling programs in other
countries is to contribute to environmental protection by creating a nationally recognized
label that:
« allows consumers to choose environmentally compatible products, and reject
environmentally damaging ones
encourages producers to reformulate their products and processes to meet
demand for environmentally compatible products
promotes general awareness of environmental issues in both consumers and
producers.
Thus the label is intended to become a national market mechanism that provides useful
information to consumers who are already environmentally conscious, and encourages
producers to respond accordingly. It is also intended to be an educational tool that will
raise consumers' and producers' environmental awareness. The U.S. program should
have the same basic goals.
In addition to these basic goals, the U.S. environmental labeling program should
be structured so as to meet several important performance criteria. These criteria are
listed below:
The program's goals and operations must be deafly and successfully
communicated to consumers, producers, and interest groups.
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The program must be scientifically credible m the eyes of consumers
oroaucers and Tterest groups, thus ensuring that participation 'eve's a-d
sjooort wiii oe as as possible
Administrative aeiays and legal difficulties, which could damage the image of
:ne program suDstantially, should be avoided or at least minimized
e Conflicts with other labeling and/or pollution prevention programs, which
would damage the program's image and could slow its implementation,
should also be avoided.
These performance cntena address issues that are not unique to the U.S., but may be
more important in the U.S. than in many other countries because of consumer
skepticism, wanness of government and large businesses, the U.S. legal system, and
the large number of related labeling, recycling, and other programs already underway.
Failure to consider these cntena could senously jeopardize the success of the program,
due either to lack of interest or to cnticism and distrust of the program.
Program Functions
With these goals in mind, this section suggests guidelines for several important
functional aspects of the U.S. environmental labeling program. Our discussion assumes
that the U.S. program would be a voluntary, positive-labeling program, similar in some
ways to the programs operated in other countnes. A mandatory program or a warning-
label program could not meet the goals discussed above in the same way, and would be
a fundamentally different type of program with different legal and regulatory implications.
The major functions of the program should indude the following:
nomination and selection of product categories,
development of product criteria,
testing, certification, and monitoring of products,
label design, education, and promotion,
finances,
legal support, and
program evaluation.
Nomination and Selection of Product Categories
The developers of the program will put in place a process for identifying and
choosing categories of products to be labeled. Candidate product categones must be
identified, screened in a logical manner, and eventually either rejected or selected for
development of specific criteria This process should be carried out within a
management structure that will provide for the participation of a broad range of
organizations and individuals.
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In other countries, suggestions for product categories are solicited from tre
general public Suggestions are received from consumer and environmental
organizations, manufacturers, government organizations, and other interested groups
Tne suggestions are then subjected to an initial screening and prioritization, after which
a higher authority (the government or advisory panel) decides which categones to target
for cntena development. This system seems practical and well suited to the U S
labeling program.
We also suggest that a comprehensive mailing list be developed with names of
interested individuals and organizations. Members of this list would receive requests for
suggested categories, and periodic mailings explaining the status of the suggestions.
Product categories that might be considered initially would include those that
have been selected in several other countries. Examples include:
recycled paper products
recycled and recyclable plastic products
other recycled and recyclable containers
re-treaded tires
re-refined oil products
insulation materials
water-based paints
recycled rubber.
as well as many others. There are severed advantages to considering products in these
categories initially:
the experience of other countries can be applied
in some cases (e.g., recycled paper), much research on criteria already exists
in the U.S.
in some cases. EPA Procurement Guidelines exist and could be applied as a
starting point tor the criteria
these categories represent products that are thought to have a high impact;
for example, the solid waste stream in the U.S. is about 40% paper by weight,
representing a dear opportunity tor reducing waste by recycling paper.
The first three points imply that labeling of products in these categories could be
implemented quickly, helping the program achieve quick recognition and awareness.
Several other countries have taken a similar approach, labefing recycled products and
other "clear environmental winners" initially and saving more cRfflcult product categories
for later.
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It should be noted that products made from recycled and recydaole oaoer a~c
o'asvcs have already been targets of much controversy in this country ("dts;-/ zrz.z:.
ar.a s-a:e ana local governments use different definitions of ""ecyciea" arc ~'~c, z az -
This controversy could cause difficulties for the labeling program On the other r.arc
tne ladeimg program could be seen as an opportunity to resolve debates about
definitions
In addition to consumer products, other countries' programs label, or plan to
label, services and/or packaging. The U S program should consider this also, although
initially it should focus on products. In many cases, product packaging could be
considered part of the overall product for the purpose of assessing impacts.
Because toxic chemicals, some pesticides, some drugs, and dangerous products
are already subject to warning labeling regulations, the possibility of disqualifying them
from receiving the environmental label should be considered. This rule, which will be
used in Norway's program, would reduce consumer confusion and avoid conflicts with
existing laws. However, some interest groups will likely argue in favor of allowing these
products to be labeled, so this is an open issue.
When decisions are made whether to include a product category in the program,
input from a vanety of disciplines and interests should be considered. The
Environmental Choice Board (in Canada) and the Environmental Label Jury (in West
Germany) both consist of individuals from a variety of organizations and backgrounds.
These individuals are committed to the goals of the program, and many have technical
or product knowledge in addition to medium- or high-level managerial and public-contact
expenence.
Development of Product Criteria
Perhaps the most difficult and controversial aspect ot environmental labeling is
the development of the criteria that determine whether products receive the label. Other
countnes have spent a great deal of effort working with experts from scientific and other
fields to try to decide how criteria should be developed. Despite this, and despite more
than ten years of experience with the West German program, most countries are still
grappling with their product criteria. No country has developed a formal methodology
for developing product criteria; the process is typically somewhat ad hoc.
A formal process, perhaps using quantitative methodology such as multiattnbute
utility analysis, could in theory be used to develop product criteria. However, there are
many different product criteria to compare for any one dass of products, and many
product classes to consider. A formal process would have to be fairty streamlined to
succeed.
Whatever the process for defining product criteria - formal or informal, simple or
complex, quantitative or qualitative - the process should involve as broad a group of
interested parties and scientific experts as possible. Well-qualified experts and
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researchers, including individuals from the EPA and other agencies, should contribute *c
criteria develooment
The process of drafting the criteria should utilize the best technical information
currently available Such information should include the range of environmental impacts
caused by products m the product category, various measures of the costs (or benefits)
of these impacts, and the likely effect that alternative product criteria would have on the
marketplace (consumers and producers.) The criteria should be defined so that some
manufacturers are rewarded for their efforts, and others are encouraged to improve.
This implies that the label should not be awarded to all the products in a category (a rule
that is informally used in some other countries).
Also, the process for changing the criteria over time should be considered in
advance, and perhaps discussed with manufacturers in advance. Several questions
can be posed that illustrate the reason for this. For example:
Are the criteria intended to help drive the development of new production
technology? If so, then perhaps only the very best product in a class should
be labeled, so that other manufacturers are encouraged to improve.
If most other manufacturers improve their technology to the point that they
qualify to receive the label, then should all their products receive the label? If
so. then there will be no remaining incentive for the manufacturers to improve
still further. If not, then the manufacturers will be denied their "reward" for
improvement, which could lead to understandable frustration and possibly
legal action.
We also recommend that the final decision on the product criteria be made by the
same group of individuals, representing varied interests, who decide on the product
categories. This approach is consistent with other countries' systems and seems to be
sound.
The development of product criteria (and the screening of product categories to
include) should use a crarfe-to-grave approach that considers all the possible
environmental effects. All phases of the product's life cycle - production, distribution,
use, and disposal - should be considered, as well as the use of raw materials, and
possibly energy consumption during production and use. The impacts considered
should include air and water emissions, solid waste, hazardous waste, toxic effects, and
health and safety risks. Such an approach, while obviously difficult to implement, is
crucial to the success of the program. Among other countries, only Great Britain favors
a simpler approach, and its government is being severely criticized for this position.
One obvious difficulty with the cradle-to-grave, multi-effect approach is that of
quantifying the environmental impacts. Questions that arise include the time horizon of
the impacts, and how to compare and trade off different impacts. Often, data are not
available on some types of environmental impacts, in which case a decision must be
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made whether to aisaualify the product category until data are avaifaDie A roia*ea
Droo em 15 new to draw tne ocundanes of the product 5 impacts, esoec a-!y a: --9
arc er.a c' i'S 'e c/cle Cons.aenng raw materials tra; r~a^e ,3 '~e 0':c_;-
cc^.a oe extended to mcude considering tne processing of tne matena 3 w- c~ -vc^.c
acc accitional complexity Likewise, the product's impacts upon disocsai may ceoenc
on the disposal method and on the other characteristics of the waste stream All these
difficulties nave been addressed in other countries and should be discussed starting m
the early stages of the U S program
While the development of the product criteria should consider all impacts of the
product, the final cnteria may in fact be quite simple. Often, within a product category,
all the products will have similar impacts or no relevant impacts along several
dimensions. Along a few dimensions, their impacts may be quite different. Only the
dimensions that differentiate among products need to be considered in the final product
criteria.
There are many other issues related to the development of product cnteria. and
as mentioned above, other countries have addressed them as well. Much additional
research could be conducted on the topic. In particular, quantitative methods and
formal processes could be designed for both selecting product categones and
determining product cntena.
Testing. Certification, and Monitoring of Products
Once product categories and critena are in place, the program will require a
system for testing certain products, certifying those that meet the critena (for example,
verifying that a lubricant truly contains 50% re-refined oil, or that a plastic bottle is
recyclable) and monitoring continued compliance. These requirements could be met in
a number of different ways. For example, a single large laboratory could be selected to
carry out the testing processes for all products. At the other extreme, product
manufacturers could be required to submit their own test results from the laboratory or
testing organization of their choice.
In terms of meeting program goals, the testing, certification, and monitonng
process has a significant effect on the technical credibility of the program. Therefore, m
cases where the product requires formal testing, the testing process should involve
laboratones that are highly qualified to test the particular product. It is unlikely that any
single large laboratory will have sufficient expenence with all the product categories that
might be labeled. Instead, the program should rely on the use of a portfolio of different
laboratones, universities, and independent experts to help design the testing process
and carry out the testing. This also minimizes start-up time, since laboratones with the
specific necessary experience already in-house can be used.
As in other countries, manufacturers should pay a fee to use the label on their
products, and should pay for any testing that is required. Possible fee structures are
discussed in the Finances section. Once a product has been tested and qualifies for the
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label, a contract should be drawn stipulating the manufacturer's rights to use the label
Tne size and placement of the label on the product should be specified, as well as
allowed uses of the label m advertising, and the length of time for whicn the contract 5
valid
Many other countries have designed their contracts so that the label may be used
for three years, after which the product category may be re-visited and the cntena
changed. However, product markets and technologies change at different rates; three
years may be too frequent or infrequent depending on the particular product category
We recommend that in the U.S. program, the length of time for which the contract is
valid should depend on the characteristics of the product category, and should be
determined as the product criteria are developed.
One feature of West Germany's testing and certification process should be
adopted in the U.S. program. Before a product is given final approval for the
environmental label, the local authorities in the area of the product manufacturer's
headquarters and/or manufacturing plant should be contacted to determine whether the
manufacturer complies with local pollution regulations and is in general a good
"environmental citizen." If the manufacturer's record on environmental matters is
questionable, its right to use the label on its product should be denied or delayed until
the manufacturer complies with regulations.
The product testing process must include a system for monitoring products over
time to verify that they meet the criteria for the environmental label. Other countries
have had little difficulty with non-compliance, although some have taken companies to
court for using a label very similar to the program's label.
Product manufacturers can probably be relied upon to monitor their competitors'
claims about the environmental compatibility of their products. In case this fails, the
labeling program should be prepared to re-test products if there is any suspicion. The
program should also have the authority and resources to take offenders to court and
revoke the right to use the label (see Legal Support below).
Label Design. Educqfon, ffiml
There are three main efforts that contribute to the successful launch and
marketing of the program: design of the label, education of consumers, and promotion
of the program.
Research in the area of labeling effectiveness (see Chapter 3) indicates that
complex, wordy, technical labels are less successful than simple, attractive, non-
technical labels. Eye-catching logos or seals of approval do the best job of
communicating a concept (such as "environmentally compatible") to consumers without
requiring much effort on the part of the consumer. While these simple labels should be
backed up with more detailed information, not all consumers who notice and use the
simple labels will absorb the details. The environmental label should indicate simply
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that this is a product that has been identified as environmentally compa*'bi9 by an
oojecvve creaible organization
Tnere are several alternatives for choosing a label design
hire a well-qualified graphic artisfcompany logo designer
conduct a public contest (as was done in Canada), which has the additional
benefit of generating publicity for the program
use an existing logo, such as a government agency's logo or a modified
recycling logo.
The third option clearly depends upon the degree to which government agencies will be
directly involved in the program, an issue that is addressed in the next section. In any
case, the final design should be evaluated by a well-qualified graphic design expert, and
should be market-tested if possible.
An alternative to the labels used in other countries, which only indicate one level
of environmental compatibility (the product either is compatible, or it is not), would be to
use a senes of different labels to indicate different levels of compatibility. For example,
paper products made from 100% recycled paper would receive a gold label; products
made from 80-99% recycled paper would receive a silver label; and products made from
60-79% recycled paper would receive a bronze label. Another such system would allow
products to be rated on a numeric scale to indicate their level of environmental
compatibility. Such a labeling system obviously has implications for the design of the
product cntena, and would be more difficult to implement than a simpler system.
However, it might be better received by industry and consumers than a "compatible/not
compatible" system. Further research, including market-testing, would be required to
evaluate such a system.
A good label design is just the beginning. Based on a large amount of research
on consumer behavior, the effectiveness of labeling, and the effectiveness of recycling
and other waste-reduction programs in the U.S., we believe that it is imperative that the
environmental labeling program include both an educational and a program-promotion
effort. The purposes of the two efforts would be slightly different.
The educational effort would aim to communicate to consumers the goals of the
program, the environmental issues it addresses, and the meaning of the environmental
label. The program-promotion effort would be directed mainly at manufacturers, and
would aim to encourage their participation in the program by promoting it as a marketing
and public relations tool in addition to its other merits. Although these two efforts could
possibly be combined into one comprehensive publicity effort, we believe that the
perspective that consumers and producers would bring to the program would be so
different as to merit separate communication efforts.
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The timing of the launch of the education and promotion programs is an oDen
question Some countries have decided to postoone puolicity until the first set of
orccucts are laoeied O'hers begin promoting ;he orcgram .Ticeoately ,e g -.-c-g-
puoiic contests to design tne label) but postpone the educational effort until oroducts a-e
labeled For the U S program, the best strategy will depend on a vanety of factors,
including the nominal schedule for implementing the program, the possibility of
competing programs, and the public mood. The public mood at the moment is one of
high interest in environmental issues; it would be best to try to take advantage of this
Finances
As in other countries, the U.S. program should require product manufacturers to
pay a fee in order to use the label. This could generate a substantial amount of revenue
for the program, although investment from some source would be required initially.
Once operating, the program would require a simple financial structure and one or more
financial officers.
The financial structure of the U.S. program would depend on the organizational
structure, and the interest level and number of successful applications from
manufacturers. We recommend that, as in other countries, manufacturers pay a fee to
use the label, and bear the costs of testing and verification. In other countries, the fee
structure is based on the sales of the product (e.g., 0.5% of annual sales), in some
cases the one-time and testing fees are paid once upon the establishment of the
contract; in others it is levied annually. The fee is paid again when the product is re-
tested and the contract renewed (e.g.. after three years.)
A similar fee structure should be set up for the U.S. program. Annual fees could
generate more revenue than one-time fees, but would also generate more paperwork. If
the fee is based on percentage of sales, it should not exceed a specified maximum,
perhaps $5000 annually (in addition to testing costs.) The costs associated with
certifying the product will be virtually all fixed and will not vary with the product's sales
volume. The purpose of the fee structure should be to recover costs without charging a
fee high enough to prevent manufacturers from applying for the label.
For small companies trying to launch new, environmentally compatible products,
program financial officers should consider a special fee structure allowing the
companies to "borrow" the fee and pay the program back later. This would help
encourage entrepreneuring of environmentally compatible products and development of
new technologies. However, caution would obviously be warranted in such cases, as
the program's purpose is not to finance start-up companies.
Programs in other countries are expected to become self-supporting after a few
years. However, each has required initial investments on the order of several hundred
thousand dollars per year - enough capital to fund several full-time staff members, pay
overhead expenses, retain legal counsel, hire experts on a part-time basis, and obtain
publicity. This is considered a small investment to prevent pollution at the source, and
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raise awareness of environmental issues, compared to the expense of pollution
c'eanuo
Most other countnes have attempted to reduce costs by using existing
government agencies for a substantial part of the program management ana some of
the technical expertise Under the organizational structure we propose in the next
section, it is difficult to forecast how quickly the program could become self-supporting
It is safe to predict that it would operate at a loss for the first few years However, once
it is operating smoothly and a substantial number of products are labeled, manufacturer
fees could easily cover the operating costs.
Legal Support
In the early stages of the program, there will be important legal issues to resolve
Program developers must hire a legal team to conduct research on the potential liability
of the program staff, advisory panel, and other participants, in the case of a lawsuit.
The legal staff should investigate the possibility of the federal government's
indemnifying the program participants. Also, the staff should explore precedents for
avoiding lawsuits by manufacturers who stand to lose revenues or bear costs because
of the environmental label. Finally, the legal staff should take action to copynght the
label, the name of the program, and any slogans to be used to promote the program.
Depending on the organizational structure of the program, there may be many
other legal issues. The program may have to retain full-time legal counsel during its
initial stages, and a part-time or small legal staff thereafter. Legal problems have been
fairly insignificant in other countries, but such luck cannot be assumed in the U.S.
Program Evaluation
The final recommended program function is to monitor the effectiveness of the
program and identify opportunities for technical improvement. To date, no other
countries have conducted formal assessments of the effectiveness of their labeling
programs. West Germany is the only country with enough experience to do so, and has
no plans to. The design of the U.S. program should include plans for assessing the
program's impacts on product markets in the medium- and long-term. Such
assessments are valuable for evaluating the program's effectiveness in meeting its
goals, and politically useful if the program continues to operate at a loss after several
years.
The criteria used to label products should take into account the best technical
information now available. However, the program will not necessarily address the
improvement of current technical knowledge. If there is insufficient data on the
environmental impacts of a product category, the category should probably be set aside.
For this reason, the labeling program represents an excellent opportunity for
identifying technical questions that should be answered, through government-funded
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research or other means There should be a mechanism for the program staff to
communicate recommended research issues to government orogram offices,
javers.ties and ctner organizations Presumaoly tne orogram wouic oene'-t 'C"
fecnn cal advances that enaoled new categories of products to be tested and iaoeiec
Program Structure
In this section, we recommend an organizational structure for the environmental
labeling program, and discuss some of the implications of the recommended structure
Recommended Structure
In order to best meet the goals of the U.S. environmental labeling program, and
conduct the functions descnbed above, we recommend that a new, independent, non-
profit organization should be created. An organizational chart of the structure we
recommend is shown in Figure 2.
The ultimate authority for the design of the program, the setting of policy, and the
staffing of the program would reside with the Board of Directors. The Board would be
composed of about eight to twelve individuals with high public visibility, credibility on
environmental and other issues, and very high-level management experience.
Examples of such individuals would be CEOs or presidents of large corporations with
good environmental records, directors of well-known consumer and environmental
groups, presidents of universities, and possibly (depending on the legal implications)
administrators or directors of government agencies. Other possibilities include former
politicians, retired EPA officials, and possibly a top-level official from West Germany
who was involved in setting up the program there.
The role of the Board would be to set policy, represent and support the program,
amend the charter if necessary, and appoint (and if necessary, remove) the Technical
Panel and the program Executive Director. The Board would not participate directly m
decisionmaking about product categories or criteria. It would exert its influence through
its policymaking and hiring powers.
The Board of Directors would be appointed by the Administrator of EPA. with the
participation of the President of the United States and other Executive officers. The
Board would meet twice a year, would serve a term of three years, and would receive a
stipend and reimbursement for expenses. Overall, the Board would operate similarly to
Boards of Directors and Boards of Trustees in other for-profit and non-profit
organizations.
The Technical Panel would consist of sixteen to twenty-four individuals who
would be charged with the responsibilities of deciding on product categories, product
criteria, and labeling. It would meet four times per year to review recommendations
made by the Executive Director and Product Panels. Like the advisory boards m other
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Appointed by
EPA Administrator
and Others
STAFF
Education/
Promotion
Technical
Legal
INDEPENDENT
LABORATORIES
Executive
Director
BOARD OF DIRECTORS
8-12 Members
TECHNICAL PANEL
16-24 Members
PRODUCT CATEGORY PANELS
- CHAIRMAN FROM TECHNICAL
PANEL
- PRODUCT MANAGER,
STAFF MEMBERS FR6m STAFF
- OUTSIDE EXPERTS
FIGURE 2. MANAGEMENT STRUCTURE FOR ENVIRONMENTAL LABELING PI« n ,h, f l
-------
countries' programs, the Technical Panel would be made uo of individuals from cive^se
oac'«g'Our-cs'ncludmg commerc al firms industry grouos consumer grouos
env 'ormen'al grcuos academia sc;en:;tic fields, and nea-:h f.e'cs in aac.* on c~-=
mere staff from EPA and other government organizations would serve on the pane! f
legally oossible
The Technical Panel members, as the name implies, should be technically
competent Several members, such as those from environmental groups, certain
industry groups, academia, science, and EPA, should be quite proficient in evaluating
the environmental impacts of particular classes of products. While the role of the Board
of Directors would be to represent the program at a high level, the Technical Panel
would be involved directly in setting product cnteria and should be qualified to do so
The Technical Panel would receive a stipend and would be reimbursed for expenses.
The Executive Director would be a full-time manager, proficient in environmental
issues and expenenced in managing a diverse staff. He or she would supervise full-
time staff members on a day-to-day basis. In addition, the Executive Director would be
ultimately responsible for making recommendations to the Technical Panel for their
review. Also, he or she would be ultimately responsible for the program's budget and
for supervising outside subcontractors (such as experts hired on a temporary basis.)
Under the supervision of the Executive Director would be a staff with at least four
components: technical, educational/promotional, financial, and legal. The Technical
Staff would consist of at least five people, whose responsibility would be to coordinate
all research and investigation with regard to product categories and criteria. Technical
Staff members would also serve as product managers and staff members for Product
Panels. Also under the Executive Director would be the educational/promotional staff,
financial staff, and legal staff (although these functions could, in theory, be contracted to
other companies). The Executive Director would also manage administrative (support)
staff members. The total number of staff members would be at least ten, unless some
functions (e.g.. legal) are subcontracted.
The process for selecting product categories and criteria is depicted in Figure 3.
Product categories would be solicited from the general public. The Technical Staff
(under the supervision of the Executive Director) would screen these suggestions and
reject inappropriate ones. Suitable categories would be put in order of prionty. The
highest-priority categories would be identified and each would be assigned to a team of
Technical Staff members for further research.
The Technical Staff team would investigate what is known about the product
category, drawing upon the resources of the EPA and other agencies. They would
identify the likely major environmental impacts, summarize the issues, and develop a
set of recommendations. These recommendations would be presented to the Technical
Panel at the earliest possible meeting date. For proctacts that seem suited tor labeling,
the Technical Panel would discuss the issues and vote on whether to reject the
category, accept it, or conduct further research.
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TABLE 3. PROPOSED PROCESS: SELECTING PRODUCT CATEGORIES FOR
THE ENVIRONMENTAL LABEL
PRODUCT CATEGORY SUGGESTIONS
^GENERAL PUBLIC)
REJECTS CATEGORIES
REQUESTS
MORE
RESEARCH
REJECTS CATEGORIES
ACCEPTS CATEGORIES
REJECTS CATEGORIES
REQUESTS
REVISION AND
RE-REVIEW
REJECTS CATEGORIES
ACCEPTS CRITERIA (WITH OR WITHOUT CHANGES)
TECHNICAL PANEL^^
^REVIEWS PROPOSED CATEGORIE!
-OISCUSSES POSSIBLE CRITERIA
TECHNICAL PANEL^\
- REVIEWS DRAFT CRITERIA
OISCUSSES POSSIBLE CHANQI
TECHNICAL ASSISTANCE
FROM EPA.
OTHER AGENCIES
TECHNICAL ASSISTANCE
FROM EPA.
OTHER AGENCIES
STAFF
- RECEIVES SUGGESTIONS
- CONDUCTS PRELIMINARY SCREENING
STAFF
- CONDUCTS PRELIMINARY RESEARCH
- PROPOSES CATEGORIES TO TECHNICAL
PANEL
STAFF
ASSEMBLES PRODUCT PANEL: STAFF
MEMBERS. PRODUCT MANAGER. ADVISORY
PANEL MEMBER. EXPERTS
- DESIGNS DRAFT CRITERIA
OBTAINS COMMENTS FROM PUBLIC
(CONTINUED)
-------
TABLE 3 (CONTINUED)
~
REQUEST
RE-TESTING
OR DELAY
REJECTS PRODUCTS
FOR LABELING
ACCEPTS PRODUCTS FOR LABELING
TECHNICAL PANEL \
REVIEWS RECOMMENDATIONS
MANUFACTURERS LABEL PRODUCTS
INDEPENDENT LABORATORIES
TEST PRODUCTS
STAFF AND PRODUCT PANEL
DEVELOP RECOMMENDATIONS FOR
PRODUCTS TO LABEL
manufacturers apply to label
THEIR PRODUCTS
STAFF
WRITES CONTRACT WITH PRODUCT
MANUFACTURERS
-------
For each accepted product category, the Executive Director would apod"" a
Tecnr.cal Staff memoer to oe the Product Manager Additional memoers of T,e
Technical Staff would also be assigned to the Product Panel, along with one memDer c;
the Technical Panel The Product Panel would then identify areas for further researcn
and assemble experts in the environmental impacts of the product category The
Product Manager would be responsible for ensuring that:
draft Product Critena are developed
the draft Criteria are made available to the public for a review period lasting
about 45 days
the draft Critena and the public comments are summanzed and
communicated to the Technical Panel at the earliest possible meeting, along
with recommendations.
At that meeting, the Technical Panel could vote to accept the proposed criteria (possibly
with modifications), reject the category (e.g., because of new technical evidence), or ask
for further work, such as revisions and another public review.
Once the product criteria are in place, the Product Panel would remain intact long
enough to specify completely the testing, certification, and monitoring process and
make sure that the testing system is put into place. Following that, the Product Panel
would disband. The Product Manager and the Executive Director, however, would have
the joint responsibility for monitoring approval/rejection of products, continued
compliance, and starting the process of re-evaluating the product category after the
appropnate period of time.
Final decisions on the labeling or rejection of independent products would be
recommended to the Technical Panel by the Product Manager and the Executive
Director. Individual products would not receive the label until approved by the Technical
Panel.
The testing of products could be conducted by one or several independent
laboratories, and/or manufacturers could submit their own proof of testing from an
approved laboratory. Manufacturers should pay a small (but not insignificant) fee for the
use of the label, and should also pay lor the testing of their products, as discussed m
the previous section.
Implications of the Recommended Structure
Several federal government agencies would be involved in the labeling program
in some capacity, but none would actually operate the system as it is proposed here.
Clearly, the EPA will play an important role in the design and setup of the program In
addition, EPA staff might serve on the Technical Panel, and would provide technical
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expertise to the Product Panels There are a large number of other agencies rat
s-c- c orooaDly be involved, including the "ouncil on Environmental Quality tre
Deoarment of Commerce, the Federal Traae Commission, the Consumer Prccuct
Safety Commission the Occupational Safety and Health Administration, the National
institute of Standards and Technology, and others. However, the program would be run
Dy a legally independent organization
There could be several benefits to EPA's administering the program, instead of
the independent model we recommend. The existing administrative structure and
technical expertise within EPA would make the program less expensive to set up and
run initially. A labeling program seems to fit with EPA's goals and would likely generate
much interest and enthusiastic participation within the organization.
In Canada, Environment Canada is managing the EcoLogo program, and
promulgates the final decisions through the authority of the Minister of the Environment.
In Germany, the Federal Environment Agency is similarly responsible for many aspects
of the program. A program structure similar to these coukj be adopted in the U.S.
There are. however, disadvantages to EPA's operating the program. In our
opinion, the most compelling disadvantage is the requirement that EPA's decisions be
subject to legal requirements such as due process and the Administrative Procedures
Act. The regulatory process could make it very difficult to launch the program and put
labeled products on store shelves in a timely manner. As mentioned in the previous
section, such delays could damage the image of the program. Also, EPA is subject to
changes in the Administration. In the medium or short term, such changes could result
m the erosion or disbanding of the program. To the extent possible, the program should
be insulated from the political process.
The program design we recommend ensures that EPA and other federal
agencies are involved, but are not responsible legally for the overall operation of the
program. A similar model is the labeling program in Norway, which will be run
separately from the government, through an independent organization, although many
of the Board and Council members will be government officials. Sweden also proposed
a similar program, although the government is now planning to contract it out to a large
standards institute.
We do not recommend contracting the program to an existing organization
because we have not identified an organization that could meet alt the program goals,
in particular, existing organizations do not have the credibility, public visibility, and high-
level management combined with the technical expertise that would be required. We
considered the possibility of involving an organization such as Consumers Union, whtch
enjoys high recognition and public credibility, but their policies prevent their taking on
such a task.
There are several variations to the program that we also considered. None
seemed to meet our goals as well as the one we recommend. However, one possible
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variation would be to combine the Board of Directors and the Technical Panel into a
single Board that would both manage the program and make product decisions T-e
disadvantage of this approach is that the Board of Directors wouid not oe as ^.c- ew
as we would like to ensure credibility and visibility with the public
Proposed Next Steps
The previous sections outline the goals, functions, and structure we recommend
for an environmental labeling program. This section descnbes the immediate next steps
that should be taken to pursue an environmental labeling program. These next steps
fall into two categories: action and research. The process of setting up the program
would be greatly expedited by conducting these in parallel.
Action
The first and most important activity is for the EPA to assemble a small task force
with two pnmary responsibilities:
Conduct background research on the legal feasibility of the program, and draft
appropriate legislation
Conduct background research on the market feasibility of the program, and
generate public and government support.
The legal background research will serve to resolve important issues that were
mentioned in the previous sections. They include:
The possible role of government officials on the program's Board of Directors
or Technical Panel
The corporate structure appropriate for the program
The possibility of consumer and manufacturer lawsuits, and of indemnifying
the program against liability.
The task force may identify other legal issues as well. One of its two major objectives
would be to resolve these issues to the extent possible, and then draft the
corresponding legislation.
The importance of public and government support was discussed at some length
in earlier sections. To obtain this support, an assessment of enthusiasm for the
program concept is required using surveys, interviews, or other measurement
techniques. This research will serve as a feasibility check of the program, determining
whether it has the potential to succeed in meeting its goals. It will also help to suggest
changes to the program. The second major objective of the task force would be to
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assess oublic interest, and then generate support for the program from the govo'rre-
relevant organizations and mdivicual citizens Much of the suooon gererai-cr * ze
.".fora< we are not -ecomnenaing substantial publicity aunng ;ne orcg'arn aes.g-
stage Fcr example supoort could be generated from government agencies ana
interested organizations through telephone calls and newsletters
Research
Earlier m this chapter, we recommended the functions and structure of the U S.
environmental labeling program. Several of the functional and structural issues suggest
research that should be conducted before the specifics of the program are determined.
For example, it may be important to conduct surveys on consumer reaction to
alternative label designs (as discussed below) before actually deciding on the final
version.
The additional research falls into two categories: technical and marketing.
Recommendations are given below for research in these two categories.
There are many unresolved technical issues associated with the program. Many
of these could be delayed until the program is underway. However, initial technical
research should consist of three main tasks:
Identify high-priority product categories
Survey existing information on the environmental impacts of high-prionty
products
Investigate ways to structure the product criteria selection process; for
example, Investigate the use of multiattribute utility analysis and compare it to
the more informal processes thai are used in other countries.
The first task will help ensure that the program gets off to a quick and impressive start.
The second task will involve research within government agencies and universities, and
will save much time and effort compared to trying to evaluate all products from scratch.
The third task will answer the question of whether the process of designing product
cnteria should be formally structured, and if so. how.
The initial marketing research also involves three main tasks:
Determine how to promote the program among manufacturers
Determine how to educate consumers about the program
Select the best label design.
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Promotional and educational research should focus on how best to communicate
the labeling program to producers and consumers Public relations and/or marketing
experts should be consulted, and past promotion programs examined to c!er9r-r -o
what the themes of the campaign should be and what the communication meaia sncuic
be For example, should the program be descnbed through brochures'7 Press
releases7 News articles9 A combination of these9 In which publications or at what
locations should the program be publicized? Our research on labeling effectiveness
shows tnat the media campaign accompanying a labeling program can help make or
break the program; therefore, we recommend that publicity be considered an important
part of the program, deserving of background research.
Research should also be conducted on possible label designs. This should
include not only what the label should look like, but whether there should be different
levels of the label (e.g., gold/silver/bronze), and whether the label should include some
sort of scale rating. At a minimum, the semi-final label should be tested on consumers
in an interview or other research setting. Consumers should be asked what the label
suggests, how appealing it is, and whether alternative labels would be better. More
advanced studies could include simulated shopping experiments, in which the label is
affixed to some products and shopping behavior is measured to see whether shoppers
are more likely to choose products with the label. A variety of other study designs could
also be used. Quantitative techniques could be used to analyze the results.
To summarize the recommended next steps, EPA should immediately assemble
a task force with responsibility for investigating legal issues, drafting legislation, and
measuring and generating support for the program. Concurrently, technical and
marketing research should be conducted. At a minimum, the technical research should
identify initial product categories, survey existing information, and better define the
product criteria selection process. The marketing research should determine
communication strategies for manufacturers and consumers, and should design and
market-test the environmental label.
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APPENDIX A
REFERENCES FOR CHAPTERS ll-IV
In conducting the research for this report, we assembled a wide range of
reports, articles, and other reference matenals. We also contacted about 50
individuals to discuss issues related to environmental labeling and gather more
information. This Appendix lists the source materials and individuals that had a
direct influence on the content of this report. Many other individuals, who are not
listed here, also contributed helpful comments and insights. They include staff
from EPA, other federal agencies, and state agencies, as well as environmental
groups and consultants in vanous environmental fields.
A-1
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References: Environmental Labeling Programs
Abt Associates inc . for Kashmanian. RM,US Environmental Protection
Agency Promoting Source Reduction and Recyclability in the Marketplace A
Study ol Consumer and Industry Response to Promotion of Source Reduced,
Recycled, and Recyclable Products and Packaging, September 1989.
Book, Steven, California Health and Welfare Agency. Personal communication.
Brooks, Jack. Vice Chairperson, Environmental Choice 8oard (of Canada).
Personal communication.
California Attorney General s Office. Personal communication and
correspondence.
Canadian Standards Association/Environment Canada. Detail Design of the
Environmental Choice Program. Unpublished draft, May 1989.
Council on Economic Priorities. Shopping for a Better World, 1989.
Environmental Data Services Ltd. Eco-Labels: Product Management in a
Greener Europe. Southwell Press Limited, Camberley, England.
Environmental Data Services Ltd. Report 175: August 1989, pp. 24-25.
Environmental Data Services Ltd. Report 177: October 1989, pp. 25-26.
The Foundation TEM-University of Lund. Environmental Labelling in the EFTA-
Countries, Invitation Seminar at the TEM-Centre, Sweden (Sjobo), August 28-29,
1989.
Haighton, Robin, Canadian Standards Association. Personal communication.
Hardman. Graham, Secretariat to Environmental Choice Board, Environment
Canada. Personal communication.
Husseini, Ahmad, Canadian Standards Association. Personal communication.
Jensen. Birger, The SwecSsh Ministry ot Public Administration. Personal
correspondence.
Killingland. Tore, Norwegian Consumer Council. Persona) correspondence.
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Kizer. K W , Warnner, T £ , and Book, S A Souna Science m t,u,e
Ir-oierrentation of P-johc Policy A Case Reoon on Cal:forr,;a 5 Prcocs."'" "35
J~-'"51 c! *"e Arr^rca"' Mea.Cci Aoscc.a'icn Aug'_s;*.3 '333, 00 }5' }55
'er Ecda. Federal Ministry for the Environment. Nature Conservation, a"d
Nuclear Safety, Federal Republic of Germany Personal communication
Pennsylvania Resources Council. Become an Environmental Shopper Vote for
the Environment, 1986, and Environmental Shopping Product List, January 1989
Pettit, Peter, Bureau of Waste Reduction and Recycling, Division of Solid Waste,
New York State Department of Environmental Conservation. Personal
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References: Food and Nutrition Labeling
Ricnardson, P , Remhart. G . Rosenthal A . Hayes. C and Silver S Rev ew c"
the Research Literature on the Effects of Health Warning Labels - A Report to tne
United States Congress Report by Macro Systems, tnc for the National Institute
on Alcohol and Alcohol Abuse, of the Department of Health and Human Services,
Juna 1987
The Great Amencan Health Pitch, Business Week, October 9, 1989. pp 114-133
Daly, P.A. The Response of Consumers to Nutrition Labeling. The Journal of
Consumer Affairs, Winter 1976, pp. 170-178.
Feick, L.F., Herrmann, R.O., and Wartand, R.H. Search for Nutrition Information.
A Probit Analysis of the Use of Oifferent Information Sources. The Journal of
Consumer Affairs, Winter 1986. pp. 173-192.
Food and Drug Administration. Public Response to Labeling of the Sodium
Content of Foods. Washington: National Technical Information Service, 1983.
Hadden, S.G. Read the Label: Reducing Risk by Providing Information.
Westview Press/American Association for the Advancement of Science, 1986.
Jacoby, J., Chestnut. R.W., and Sifberman, W. Consumer Use and
Comprehension of Nutrition Information. Journal of Consumer Research,
September 1977, pp. 119-128.
Klopp, P. and MacOonald, M. Nutrition Labels: An Exploratory Study of
Consumer Reasons for Nonuse. The Journal of Consumer Affairs. Winter 1981.
pp. 301-316.
Lenahan. R. J., Thomas, J.A., Taylor, D.A.. Call, O.L, and Pac&erg, 0.1.
Consumer Reaction to Nutritional Labels on Food Products. The Journal of
Consumer Affairs, Summer 1973, pp. 1-12.
Levy, A.S., Mathews, O., Stephenson, M.. Tenney, J.E., and Schucker, R.E. The
Impact of a Nutrition Information Program on Food Purchases. Journal of Public
Policy and Marketing. Vol. 4,1985, pp. 1-13.
Russo; J.E.. Staelin, R.. Nolan, C.A., Russell. Q.J., and Metcaif, B.L Nutrition
Information in the Supermarket. Journal of Consumer Research, June 1986,
pp.48-70.
Schucker. R.E.. Stokes. R.C., Stewart. M.L. and Henderson, O.P. The Impact of
the Saccharin Warning Label on Sales of Diet Soft Drinks in Supermarkets.
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References: Household Appliance Energy Efficiency Labeling
Andersen. C D . and Claxton, J D Barriers to Consumer Choice of Energy
Efficient Products Journal of Consumer Research, Vol 9, September 1982. pp
163-169
Bonneville Power Administration Program Description for Blue Clue Appliance
Efficiency Award Program. June 1989, and information brochure for November
1989 to Apnl 1990.
Brian Gard William Lesh Inc. Report on Market Research and Program
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California Energy Commission. California Market Trends for More Efficient
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California Energy Commission. Conservation Report. Publication 400-88-004,
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Hadden, S.G. Read the Label, 1986.
Human Sciences Research, Incorporated. Labeling and Consumer Information
Programs for Refrigerator-Freezers, A Study of the Effectiveness of Energy Use
Labeling as a Device to Increase the Efficiency of the Nation's Appliances.
Report prepared for the U.S. Federal Energy Administration, July 1976.
McNeill. D.L., and Wilkie, W.L Public Policy and Consumer Information: Impact
of the New Energy Labels. Journal of Consumer Research, Vol. 6, June 1979,
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Messenger, M., California Energy Commission. Personal communication.
Policy Planning and Evaluation, Inc. An Analysis of the Potential Impact of
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Richardson et aJ., report for NIAAA, June 1987.
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References: Automobile Fuel Economy Labeling
Abt Associates Inc Impact of the FEA/EPA Fuel Economy Information Program
Prepared for Federal Energy Administration, June 1976.
U.S General Accounting Office. Consumers Need More Reliable Automobile
Fuel Economy Data. Report to the Chairman, Committee on Energy and
Commerce, House of Representatives, July 1981.
Kahn, H. EPA to Revise Mileage Label. Automotive News. April 9,1984, pp. 1,
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McNutt, B.O., U.S. Oepartment of Energy. United States Automobile Fuel
Economy Policies and Consumption Effects. Resources and Conservation, Vol.
10. No. 1-2. 1983. pp. 9-24.
Pirkey, D.B.. U.S. Department of Energy. Assessment of the Federal Fuel
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Environmental Protection Agency, April 1982.
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References: Cigarette Labeling
Beitramim, R F Perceived Believability of Warning Label Information Present
in Cigarette Advertising. Journal of Advertising, Vol. 17, No 1, 1988, pp 26-2
Murphy, R.D. Consumer Responses to Cigarette Health Warnings.
(Summarizes 1979 FTC report.) In Product Labeling and Health Risks, Banbi
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Richardson et al., report for NIAAA, June 1987.
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References! J!)rug and Chemical Labeling
Hadden, S G Read the Label, 1986.
RiC irdson et al . report for NIAAA, June 1987.
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References: Seals and Certifications
Jaccoy, J . SzybiHo, G J , and Busato-Schach, J Information Acquisition
Behavior m Brand Choice Situations Journal of Consumer Research. Vol 3,
March 1977, pp 209-216
taBarbera, P A Overcoming a No-Reputation Liability Through Documentation
and Advertising Regulation. Journal of Marketing Research, Vol. 19, May 1982,
pp. 223-228.
Lane, M.V. and Sarel, D. 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 1981. pp. 135-142.
Parkinson, T.L The Role of Seals and Certifications of Approval in Consumer
Decision-Making. The Journal of Consumer Affairs, Vol. 9,1979, pp. 1-15.
Peters, Vicki, American Heart Association. Personal communication.
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