FUND FOR RESEARCH INTO INDUSTRIAL DEVELOPMENT, GROWTH & EQUITY

Global Review of Eco-Labels: Implications for South Africa

PHASE ONE REPORT

Introduction to Eco-Labelling

This section introduces the concept of eco-labelling, distinguishing the various recognised types of labels and identifying the main rationale for using labels. It provides a brief survey of the origins and spread of eco-labelling around the world, and identifies the countries, regions and organisations that are principally involved in driving their use.

1.1 Definition and objectives of eco-labelling

An eco-label is a market-driven environmental policy instrument used by policy-makers with the aim of promoting environmentally preferable goods and services. The label is applied to a product or service, warranting that the product or service complies with certain pre-determined environmental - and sometimes also social - criteria. The eco-label makes a positive statement about the environmental aspects of a product, and is a reward for the environmental leadership embodied in such a product.

Eco-labels are a guide for consumers to choose products and services that are deemed to be less harmful to the environment than other products within the same category. A principal objective of eco-labels is to encourage the production of more environmentally appropriate products through consumers' purchasing power. Although the distribution of eco-labels is largely concentrated in the industrialised countries, there have been a number of recent labelling initiatives within developing countries. Furthermore, the use of labels in developed countries may have increasingly significant trade consequences for developing countries.

Eco-labels are potentially attractive instruments for informing consumers (including institutions and governments that consume input materials and products) about the environmental impact of their purchasing decisions, while simultaneously providing producers with a tool for extracting market place preference, and thus market share. Eco-labels provide an opportunity to inform consumers about product characteristics that may not be readily apparent. Eco-labels are not directly quality labels; however, for a product to obtain an eco-label, it would have to be manufactured under strictly controlled conditions for it to pass the criteria laid down by the relevant eco-label.

The success of an eco-labelling initiative is dependent on a number of factors including for example: the level of environmental awareness and purchasing power of consumers; the credibility of the label; and the nature of the market for the eco-labelled products.

1.2 Distinctions of the different recognised types of eco-labels

Using a broad definition of eco-labelling, it is possible to classify eco-labelling programmes on the basis of various key characteristics, including in particular:

1.  
   • Whether the programme relies on first-party or third-party verification.
   • First-party verification is undertaken by the producers / marketers themselves, with the aim of promoting the positive attributes of the product.
   • Third party verification is undertaken by an independent source that awards labels on the basis of defined environmental criteria.
   • Whether the product labelling is positive, negative or neutral.
   • Positive labelling certifies that the product possesses one or more environmentally preferable attributes (e.g. no ozone depleting substances).
   • Negative labelling warns consumers of possible harmful effects substances contained in the labelled product.
   • Neutral labelling simply summarises environmental information regarding the product that may be used by consumers in making their product choices.
   • Whether the third-party labelling programme is mandatory or voluntary.
   • Mandatory programmes typically include hazard/warning labels and information disclosure labels (e.g. Material Safety Data Sheets).
   • Voluntary programmes are generally positive or neutral initiatives, and include report-cards, seal-of-approval or single-attribute certification programmes
   • Whether the (voluntary) labels are report-cards, or seal-of-approval or single-attribute certification programmes.
   • Seal of Approval programmes (ISO Type I labels) typically involve issuing a licence to use a particular logo to products on the basis that they are deemed to be less environmentally harmful than comparable products, as determined by specific award criteria that usually include some form of life-cycle consideration.
   • Single Attribute Programmes certify that claims made for a single attribute of a product meet a specified definition (e.g. "recycled" or "biodegradable"). This includes labelling schemes such as that administered by the private Forest Stewardship Council as well as organic food labelling.
   • Report Cards (ISO Type III labels) use a standardised format to categorise and quantify various impacts/burdens that a product has on the environment, thus allowing consumers to make judgements based on their particular environmental concerns.

As outlined below, the focus of this investigation is on multi-issue, voluntary labels that are designed to apply to a small proportion of products in a product category, and that are subject to third-party verification (ISO Type 1 labels - see further below). The aim of these eco-labels is to communicate verifiable, accurate and non-deceptive information on the environmental attributes of goods and services, based on a range of environmental considerations, with the goal of changing consumer behaviour and thereby increasing the demand for, and supply of, environmentally preferable products and services. Consumers include individual retail consumers, as well as the procurement officers of governments and large corporations. Increasingly, the methodologies used to evaluate products' environmental attributes examine the impact of a product through its entire life-cycle, from raw material extraction, through production, to use and final disposal.

Motivations that typically underlie the introduction of labelling schemes:

• To promote the development of environmentally benign products through the use of market forces to complement existing process and product related policy instruments
• To increase public and consumer awareness of the environmental implications of their consumption patterns and product choices
• To enable consumers to differentiate between products on the basis of environmental performance
• To facilitate the access of locally produced goods to foreign markets that may have environmental standards
• To provide a more credible and independent instrument to replace existing semi-government and community certification and labelling schemes, some of which may be seen to be misleading (so-called "greenwash")
• To promote the trade of environmentally friendly products
• To ensure compatibility with other national eco-labelling initiatives

  1.2.1 The ISO Distinctions

  The International Organisation for Standardisation (ISO) has adopted eco-labelling as an important tool in obtaining environmental sustainability of business, and has introduced the ISO 14000 series of environmental standards. Within this category, the ISO 14020 series deals exclusively with environmental labels and declarations.

  Key ISO documents include in particular:

  • ISO 14020 Environmental labels and Declarations - General Principles (1998);
  • ISO 14021 Environmental Labels and Declarations - Self-Declaration Environmental Claims (1999);
  • ISO 14024 Environmental Labels and Declarations - Environmental Labelling Type I - Guiding Principles and Procedures (1999);
  • ISO/TR 14025 Environmental Labels and Declarations - Environmental Labelling Type III - Guiding Principles And Procedures (2000)

  A brief description of the ISO classification of the different types of eco-labelling schemes is provided in Figure 2.

  As indicated earlier, the focus of this report is specifically on ISO Type I labels: multi-issue, voluntary labels that are designed to apply to a small proportion of products in a product category, and that are subject to third-party verification. A list of some existing Type I initiatives is provided in Table 1 below.

  Table 1 - Examples of Existing Type I Labelling Schemes

1.3 Brief review of the history and increasing use of labels internationally

The first comprehensive programme eco-labelling programme - Germany's Blauer Engel (or Blue Angel) - was established in 1977. The late 1980s and early 1990s saw the establishment of over 15 independent national and multi-national eco-labelling programs (Table 1 above). Although these schemes have achieved mixed successes, there have been a number of successful programs with relatively wide product coverage and market acceptance. These include Germany's Blue Angel, the Scandinavian Countries' Nordic Swan and Europe's EU Flower. With the economic integration of Europe, the EU Flower is increasingly being accepted as the (European) regional eco-label of the future, notwithstanding the "prestige" still attached to the various national eco-labelling schemes.

Both the Blue Angel and the EU Flower have recently experienced rapid growth in terms of the number of products having been awarded the label through compliance with the pre-determined criteria. Almost 4 200 products had been awarded the Blue Angel as of December 2000, a growth of 492 products from the previous year. While the EU Flower has had a relatively slow start, to date over 100 companies (the number having doubled during 2001) have been awarded the label. Within these companies, the product coverage comprises several hundred products.

Following the establishment of these formal eco-labelling programs a number of self-declaration claims started to emerge. In a number of instances it became apparent that companies were increasingly making spurious claims, as a result of which there was an increasingly recognised need for independently verified and administered eco-labels. A number of countries sought to address this concern through the use of codes of conduct, such as for example: the Nordic Ombudsmen's Green Code, the UK Green Claims Code, and the Netherlands Environmental Advertising Code.

1.4 Typical Features Associated with Type I Eco-Labelling Programmes

Most ISO Type-I eco-labelling programmes share a broad set of similarities in the process and administrative structure that they adopt, and in the fact that they typically entail some form of life cycle assessment process. Being of a voluntary nature, eco-labelling schemes are not typically regulated by legislation (an important exception being the EU flower, which is a specific consequence of its trans-national nature). Should such a scheme be introduced in South Africa, it is anticipated that it would broadly follow the same approaches as adopted in other countries. This section briefly introduces key concepts associated with these approaches, each of which is examined in more detail in the country-specific studies undertaken in Chapter 2.

1.4.4 The Process and Administrative Structure

As indicated above, a Type I programme entails licensing the use of a logo to those products that the programme deems to be less environmentally harmful than comparable products, as determined against a defined set of award criteria. This typically entails the following process:

• Defining the product category: this is often undertaken by a central decision-making board (comprising relevant stakeholder representatives and experts)
• Developing award criteria for the product category: the criteria are usually developed on the basis of life cycle considerations, and will involve expert and stakeholder input
• Undertaking a process of public review and comment
• Adopting the final criteria making provision for the public comment
• Administering applications
• Evaluating the product against the agreed criteria, issuing a licence to successful applicants
• Reviewing the criteria and renewing applications on a regular scheduled basis

The implementation of this process is typically ensured through the use of an administrative structure that shares the following characteristics:

• There is usually some level of government involvement (typically the national environmental agency) in administering the system and/or providing advice and funding.
• Most of the responsibility generally rests with a central decision-making board, usually comprising representatives from: government, business, consumer groups, academia, and environmental groups
• The development of the award criteria typically requires the inputs of technical experts; this may be provided by standards-setting organisations, consultants, research bodies, academics, and/or ad hoc working groups for specific product categories.

The nature and composition of the various bodies described above is reviewed in more detail in chapter 2.

1.4.2 The Life Cycle Assessment Process

A core feature of most - although not all - ISO Type-I eco-labelling programmes is their focus on undertaking a product life cycle assessment as part of the certification process. In terms of the ISO definition, a Life Cycle Assessment (LCA) is a:

"systematic tool of assessing the environmental impacts associated with a product or service to: build an inventory of those inputs and outputs, and identify the most significant aspects of the system relative to the objective of the study. LCA considers the environmental impact along the continuum of a product's life (i.e. cradle to grave) from raw materials acquisition to production, use and disposal. The general categories of environmental impacts to consider include resource depletion, human health, and ecological consequences".

Generically, the life cycle of a product from raw material extraction to final disposal can be illustrated as follows (adapted from Bras, 1997):

Notes: 1. Direct recycling / reuse

Re-manufacturing of reusable components

For most labelling schemes, the ecological criteria are developed and drawn up after analysing the various stages of a products life cycle, including for example the raw material extraction, manufacturing, re-use and final disposal stages.

The LCA methodology is not without controversy. Not only is there some complexity in undertaking a sufficiently detailed and credible LCA, but in many instances there may be scope for disagreement on some of the underlying assumptions that are made in guiding the LCA. Furthermore, where ecological criteria have been drawn up based on the environmental concerns of a particular country or region, and where these criteria were not identified in a transparent manner, accusations have been made that the LCA has led to trade protectionism. The environmental concerns of highly developed and developing countries often differ significantly, and mean that certain developed country ecological criteria are not applicable to developing countries. An LCA based entirely on a certain set of ecological criteria of a particular geographic region may thus discriminate against manufacturers of other regions, and consequently be construed as being a technical trade barrier (TTB). (The issue of the extent to which eco-labelling may constitute a technical barrier to trade is explored further in Phase II).

Much work is currently being undertaken, including efforts by the ISO, to streamline the application of LCA and the drawing up of ecological criteria. This is to ensure that LCA does not lose credibility or being seen as a protectionist trade barrier by the developed world to restrict market access from the developingworld.

1.5 Recent Trends: Globalisation, Standardisation and Harmonisation

In South Africa, the past decade in particular has seen a marked shift away from policies of inward industrialisation and import substitution. This follows not only from recent political changes that have shaped the South African economy, but also from its obligations owing to its membership of the World Trade Organisation (WTO). WTO regulations, which are binding on its member countries, have required countries to reduce and eventually abolish tariff-based trade barriers, such as those imposed on many of South Africa's imports. While these changes have increasingly exposed South Africa's markets to international competition, they have also presented it with new market opportunities in foreign countries. The volume of international trade has grown exponentially in recent years, and the European Union and United States are now South Africa's largest trade partners. The trend towards globalisation is irreversible, and has had a significant impact on most countries' industrial activity. Most importantly, globalisation is forcing companies to become more competitive.

Although international trade of goods and services is increasingly being liberalised with the reduction of tariff barriers, other transaction costs such as technical trade barriers are on the increase. Such technical barriers to trade (TBTs) can take the form of environmental, social or technical restrictions on trade. For example, countries or industries no longer having recourse to tariff barriers may impose restrictions on material content (e.g. certain hazardous dyes), social issues (e.g. child labour), or technical attributes. Alternatively, industry or consumer-led market pressure may lead to increased differentiation of some products according to their (favourable) attributes, and such products accordingly labelled with, for example, an eco-label. Complying with such standards may, in the long run, become the de-facto requirement for market access.

Standards are specifications approved by a recognised body for repeated and continuous application. Although compliance is seldom compulsory, standards play a significant role in the life of consumers and industry: for consumers, they offer protection and encourage confidence in products and services, while for industries, standards provide a common technical "language". In addition to ensuring compliance with technical requirements, standards may also serve as a basis for certification in terms of quality and environmental management performance. Such certification may further enhance access to markets.

Standardisation is thus an issue closely linked to globalisation and increasing international trade. Industry norms and standards are a necessary component in the development of integrated commodity chains and international trade. Whereas under a no-trade situation there is little need for the standardisation of processes and adherence to applicable norms, international trade (both of finished products and material inputs) has increased the need for product and process compatibility across international boundaries. While standards not only ensure greater compatibility and substitutability along production chains, they can also be mis/used to prevent or hamper products not complying with such standards from accessing a country's (or region's) market.

The harmonisation of standards across countries and certain industries is important so as not to prevent industrial growth and market access based on technical grounds. Organisations such as the ISO play an important role in setting and harmonising standards. In South Africa, the South African Bureau of Standards (SABS) is a member body of ISO, and thus plays an important role in developing standards in South Africa that are in harmony with international developments, especially those in South Africa's trade partners.

In response to the recent proliferation of eco-labelling programmes in both developed and developing countries, various efforts have been taken with the aim of promoting equivalency, harmonisation and/or mutual recognition of the different programmes. Key initiatives include in particular:

• The establishment of the Global Eco-labelling Network (GEN) comprising national and regional eco-labelling organisations; (see Figure 4)
• The standardisation work of the International Standards Organisation (ISO);
• The various research initiatives of the Organisation for Economic Co-operation and Development (OECD). The relationship between these harmonisation efforts and the multi-issue voluntary labels studied should be established and reported.