Eco-labeling and how suppliers benefit from it in the global competition

In 2015, the UN adopted the 2030 Agenda for Sustainable Development and selected 17 Sustainable Development Goals (SDGs), which have become a benchmark for the entire world community. They link three elements of sustainable development – economic growth, social challenges, and environmental protection.

The International Standards Organisation (ISO) has classified the existing environmental labels into three typologies – Type I, II, and III – and has specified the preferential principles and procedures for each one of them. The picture below outlines this taxonomy and gives some examples of ecolabels:

What are they and how exactly do they contribute to solving global problems?

Eco-labeling is a graphical display of a set of environmental information about a product or service, meaning that the product has a lower impact on the environment than similar products and/or is produced using environmentally optimal technologies. Eco-labeling can also be defined as an environmental marketing tool. Strict eco-certification standards motivate manufacturers to make their production more environmentally friendly and provide consumers with a simple and understandable tool for choosing products.

Environmental labels exist in all countries of the world. The most reliable of these are type I eco-labels (ISO 14024). They consider the entire life cycle of a product: from the extraction of raw materials to packaging processing. Most of these eco-labels around the world are united in the Global Eco-Labeling Association (GEN).

To obtain an eco-certificate, companies must:

  • Carefully use natural resources and reduce waste, use recycling water supply systems and return possible waste and rejects into the production cycle. This is the transition to sustainable consumption and production patterns (SDG 12).
  • Monitor electricity consumption. It is a contribution to the fight against climate change (SDG 13).
  • Use wood products from sustainable forest management (SDG 14).
  • Recultivate land in the development of quarries for the extraction of mineral raw materials. It is a contribution to the conservation of ecosystems and biodiversity (SDG 15).

What is the scale?

According to the global Ecolabel Index, eco-labels are now used in 25 industries in 199 countries. At the moment, there are over 400 different eco-certificates.

On the one hand, the coverage of various industries by eco-standardization is a positive trend: more and more manufacturers are getting the opportunity to “green” their activities. On the other hand, the growth in the number of similar documents and eco-labels in one industry can confuse, especially among ordinary buyers.

The demand for eco-products has increased not only at the level of ordinary buyers, but also at the state level. Today, many countries have developed the practice of “green” public procurement: the presence of an ecolabel is a significant advantage for tenderers. But there is also another side of the coin. As a result of the increasing demand for eco-products, unscrupulous manufacturers began to unreasonably declare the environmental friendliness of their products.

This phenomenon is called “greenwashing”. It is worth noting that some companies do this on purpose – to extract marketing benefits, others – from illiteracy. In any case, this is bad for both buyers and bona fide manufacturers.

Therefore, many enterprises deliberately go for the certification of products to the requirements of independent eco standards. Eco-labeling, which is a consequence of passing this procedure, allows you to distinguish the product on the market. Moreover, the more famous the eco-label is, the more buyers trust it.

The benefits to an enterprise

Organizations that are certified to use the ecolabel receive the following benefits:

  • It becomes possible to participate in international and domestic programs to support and develop environmentally friendly business.
  • Sales volume is growing amid growing consumer demand for environmentally friendly products and services.
  • It becomes possible to launch new environmentally friendly products and services on the market.
  • It becomes possible to obtain large institutional (government, commercial and non-commercial) contracts, the terms of which include environmental requirements.
  • There is a strengthening of the corporate reputation and evidence of the effectiveness of the company’s initiatives in the field of ecology and sustainable development.
  • The role of the brand is enhanced (if ecolabelling is involved in its development strategy).
  • There is a recognition of products at the international level, which increases the competitiveness of the enterprise (organization).
  • The internal corporate culture is strengthened by understanding the importance of the work done for human health and the environment.
  • Raising awareness among regional and local populations, which contributes to increased loyalty to eco-labeling programs and certified goods and services.

Ecology = savings

Participants of the certification program receive not only independent expert confirmation of a high level of environmental safety of products and production, but also expert recommendations that help reduce the burden on the environment by recycling waste, reducing water consumption, cleaning emissions, and also reducing production costs. The introduction of resource-saving technologies helps to obtain an economic effect even with the operation of office premises.

Research shows that in comparison with new products, remanufactured products can cost up to 50% less and help save approximately 60% of energy and 70% of materials. In contrast with making new products, less solid waste is created in remanufacturing, and emissions of air pollutants also decrease by over 80%.

For example, the introduction of waste sorting in the office and their transfer for recycling allows the company to save up to 7 thousand dollars in a year. Thus, eco-certification not only allows you to maintain a healthy work environment and increase employee productivity but also reduces the costs required to maintain an office.

To summarize, the following financial benefits can be listed:

• Production costs are reduced by reducing the consumption of energy, water, raw materials.

• The amount of waste is reduced due to the reorientation of processes to low waste technologies.

• Transportation costs are reduced by working out logistic schemes from the standpoint of greening.

• There is cost savings due to the prevention of emergency, emergency situations and the reduction of environmental risks.

• There is a possibility of benefits provided by legislation for environmentally responsible enterprises.

Eco-labeling is a reliable reference for the buyers

More than half of consumers said they would pay more for sustainable products designed to be reused or recycled, according to results of a survey from Accenture (NYSE: ACN). Especially often, according to a study by the Ecological Union and Ecobureau Greens, green is sought among the following products:

According to Nielsen, about 30% of consumers say that labels on packaging “natural”, “organic”, “ECO” – are an additional incentive to buy. The need for environmentally friendly goods and products in large cities is obvious.

The future of the global instrument

The experience of developed countries in Europe, America, and Asia shows that ecolabelling has enormous potential. According to the World Ecolabelling Association, there are over 1 million life cycle certificates worldwide. Of the 30 ecolabelling programs that are GEN members, 85% are included in national green public procurement plans. Therefore, eco-labeled products are preferred for government and retail purchases.

Using ecolabelling standards will help reduce the environmental impact of certified products. Increase environmental awareness among buyers.

At the same time, eco-labeling contributes to a significant reduction in the costs associated with the production of goods. Due to this condition, the use of eco-labeling does not lead to an increase in the price of products.