“The word on the street is everyone is selling the same food. Well, they ain't,” Whole Foods co-CEO Walter Robb told Fortune, “I want to communicate the difference and sell the difference.”1 As chapter 3 discussed, the business rationale of environmental initiatives ranges from eco-efficiency (i.e., saving money by conserving natural resources), to eco-risk mitigation (such as forestalling environmentalist attacks and reducing political pressure for extreme regulations), to eco-segmentation (through sales of green products to green consumers). Moreover, the rationale behind any and all these initiatives may also include attracting investment from sustainability-minded investors.
Attracting green customers and green investors while avoiding attacks by NGOs and regulators requires that the outside world know about the company's sustainability efforts and their results, so that the company's brand and reputation will benefit.
Companies communicate their various sustainability initiatives and achievements through a variety of channels in order to reach different audiences. To reach consumers at the point of purchase, companies use product labels, designed to help consumers distinguish between ostensibly sustainable products and others, and feel virtuous because they are “doing something for the environment.” Related marketing efforts can educate consumers about the company's sustainable sourcing, manufacturing, and transportation strategies, as well as the sustainable use and disposal of products. Companies use environmental reports or disclosure standards to tell investors, NGOs, the media, and regulators about goals, efforts, and outcomes of environmental impact reduction initiatives.
These kinds of communications can be a double-edged sword—a company's environmental claims help reap the business value of environmental sustainability efforts, but they can also invite increased scrutiny from skeptics and watchdogs. The age-old admonishment that one must “walk the talk” suggests the need for careful coordination between those who “manage the talk” (sales, marketing, public relations, investor relations, government lobbying, and senior management) and those who “manage the walk” (engineering and supply chain managers, including manufacturing, procurement, and logistics).
In a 2014 article, The Guardian demonstrated consumers’ confusion in the simple task of buying eggs in a world where cartons now carry a cacophony of claims: “Cage-free or free-range? Free-roaming or free-farmed? Grass-fed, vegetarian-fed, or whole grain-fed? Antibiotic-free, biodynamic, hormone-free, non-irradiated, natural, organic, or pasteurized?”2
As companies noticed that consumers’ environmental concerns could lead to improvements in market share or pricing for products marketed as environmentally friendly, they started to label products with green claims (or seemingly green claims). These included “natural,” “recyclable,” “biodegradable,” “energy efficient,” and so on. The variety of claims mushroomed, and with it consumer confusion and suspicion about the truth behind the labels.
To help clear up the confusion, the International Standards Organization (ISO) defined standards for three types of claims or logos on labels3 as follows:
The first two types of claims are aimed at consumers “walking down the aisle,” while the third type could not be expressed in a logo but in a data set used in business-to-business exchanges.
Regardless, it is at the consumer level that most confusion and misinformation reigns.
Chapter 3 told the story of Tesco's carbon labels. The first batch of carbon-labeled products landed on store shelves in August 2009 to much fanfare.4 Accompanying the rollout, Tesco polled its customers’ carbon awareness. Only half understood the meaning of the phrase “carbon footprint,”5 though that represented a significant increase from the 32 percent rate found in a similar survey from the previous year. The survey also concluded that half of the respondents who understood the term would alter their shopping patterns to buy products with lower carbon footprints, up from 35 percent in the previous year. In a “Green Blog” post noting the label rollout and poll results, the New York Times’ James Kanter pointed to concerns that such labels would confuse customers.6 Tesco, in a statement, dismissed that worry. Distressingly, one survey found that even if consumers did plan to alter their shopping habits, 30 to 40 percent mistakenly thought a higher carbon footprint number was better.7
“What does it mean to say a bag of chips contains 75 grams of carbon?” asked Steve Howard, CEO of the Climate Group, in a March 6, 2008, BusinessWeek article. “I have a PhD in environmental physics and it does not mean a thing to me.” Not only does the absolute number have no intuitive meaning, but it also provides no insight into which manufacturer might be working the hardest to become more sustainable. This issue has not abated since Tesco's 2009 labeling efforts, which ended in 2012 after less than 1 percent of Tesco's products had been labeled.8
A 2013 survey found that 70 percent of consumers were confused by the messages companies use to talk about their corporate social responsibility initiatives.9 “This information is really complex. Getting it reduced into a simple label for consumers is very challenging,” said Elizabeth Sturcken, managing director at Environmental Defense Fund.10
If companies issue their own sustainability claims and labels (ISO Type II labels), they face natural skepticism about the company's motives and bias in evaluating its own products. In fact, only 46 percent of consumers surveyed said they trust brands to tell them the truth in their environmental messages.11 In contrast, independent third parties (ISO Type I labels), especially those that are well-known and trusted, can help verify corporate “green” messages by providing standards, certifications, and auditing, as well as overcoming consumer skepticism.12 Consequently, many environmental organizations have created eco-labels for a wide range of sustainability attributes.
This trend toward third-party labels may have grown to unsustainable levels, however. A 2014 compilation by the Ecolabel Index service13 uncovered more than 458 eco-labels14 from a range of groups including government agencies, leading NGOs, corporations, and small, regional nonprofit organizations. One of the reasons for the plethora of labels is that many of them have a narrow regional, category-specific, or issue-specific scope. The French government applies its carbon-specific labels only to products intended to be sold within the country's borders, although that does not prevent multinational companies from using the French label in other markets. The Carbon Trust may be more global than the French label, but it still only focuses on carbon emissions. The Marine Stewardship Council certifies only seafood. Some labels are especially narrow, such as the AvoGreen label, which focuses only on avocados and only on the use of “integrated pest management” in their cultivation.
To add to the potential confusion, not all eco-labels, even those issued by third parties, are created equal. Anastasia O’Rourke, cocreator of the Ecolabel Index, documented wide variations in the rigor required by different labels. Some call for products or companies to pass rigorous on-site, third-party verification of comprehensive standards, requiring adherence to dozens or even hundreds of nontrivial terms and conditions. For others, “It's like ‘send us the money and we'll give you the [label] …’” she said. “That's a little exaggerated, but not by much.”15 In fact, a 2010 TerraChoice report claims to show a green label bought online for $15.16
A 2010 University of California study17 found that wineries that adhered to the standards for growing organic or biodynamic grapes, but which did not label their wines as “organic” (despite being certified), enjoyed an average price premium of 13 percent. In contrast, wineries that were certified and actually affixed the “organic” label to their bottles had to offer their wine at prices 20 percent below average, owing to beliefs among wine drinkers that organic wines are of lower quality. The reason may be that organic wines—which differ from wines that use organically grown grapes—do not add sulfite preservatives to their wines. Consequently, they are less stable over time and potentially decline in quality as they age.
Eco-labels can even cause a business to lose sales among certain consumer groups. A 2012 study published by the US National Academy of Science compared the sales of compact fluorescent light (CFL) bulbs, priced at $1.50 per bulb, with incandescent bulbs priced at $0.50 per bulb. If the CFL bulbs had a “protect the environment” label, then customers self-identifying as politically moderate or conservative were less likely to buy them.18 If the CFL bulbs lacked the environmental label, then conservatives and progressives bought them in similar proportions. The study concluded that economic incentives are likely to drive consumers to buy CFL bulbs, because they save money in the long run. However, environmental messages may detract from this effect. Politically moderate and conservative individuals, who tend to put less trust in the government, may think that the purpose of the environmental message is to mask inadequacies on other performance dimensions of the pricier bulbs.
A survey of coffee drinkers in China found consumers would be willing to pay, on average, a 22 percent premium for a cup of Fair Trade labeled coffee.19 Realistically, such surveys may overestimate the impact of labels: Survey participants tend to respond the way they think the survey creator wants them to respond, or they may want to appear progressive and caring. Data from actual product sales experiments, in contrast, show lower premiums for sustainability labels and sometimes no premium (or, as in the example above, a negative premium). British researchers, using an ordinary least squares model based on dozens of indicator variables, found the premium for Fair Trade coffee already on the market to be only 11 percent.20
A New England study of 26 grocery stores found that eco-labels had mixed effects on sales and price premiums. When a Fair Trade label was added to two previously unlabeled coffee varieties (one selling for $10.99 and the other $11.99 per pound), sales volumes of both increased by about 10 percent. When the prices of both coffees were raised by $1 per pound, sales volumes of the higher priced coffee remained elevated, whereas sales of the lower-priced coffee dropped by about 30 percent.21 This result suggests that wealthier consumers may be willing to pay a premium for sustainable products, while more frugal consumers might use sustainability attributes only as a tiebreaker among equally priced products, rather than an inducement to pay more.
The effectiveness of a label may also vary with the type of product. Using data on Danish consumer purchases over a four-year period, Danish and American researchers found that the Nordic Swan label enabled a 10 to 17 percent price premium for toilet paper but no willingness to pay higher prices for Nordic Swan-labeled paper towels.22 One possible explanation is that toilet paper has closer contact with the consumer's body and the eco-label might indicate higher safety and a lack of toxins, which may be more important in the case of toilet paper than in paper towels. In other words, the toilet paper had a stronger element of “on me” compared with paper towels (see chapter 1).
A 2014 study by the European Food Information Council (EUFIC) concluded that even though European consumers value sustainability and understand various eco-labels, such labels have only a minor effect on food choice. A survey of self-reported use of food label information found environmental impact information ranked 14th out of 16 categories. A conjoint analysis of food choices corroborated the label use finding in showing that nutritional attributes and price dominated consumer choice behavior. Again, not surprising given the “in me/on me/around me” framework mentioned in chapter 1. The study concluded: “Consumer understanding of sustainability does not yet translate into driving food choice.” In other words, although consumers claim they care about sustainability, they care far more about other product attributes.23
These examples and others suggest that consumers may not be very different from corporations in how they assess the value of sustainability. The corporate sustainability ROI calculations discussed in chapter 10 imply that for many companies, sustainability initiatives must first and foremost be valuable enough to justify their costs—passing the company's hurdle rate for investments. Informal discussions with corporate sustainability executives suggest that sustainability acts less as an intrinsically valuable attribute and more as a tiebreaker in business decisions for all but the most dedicated green companies and consumers.
“Eco-labels just don't necessarily have a lot of sway with … mainstream consumers. There's a ton of them, hundreds … [and] most of them, to be honest, are pretty much meaningless,” commented Keith Sutter, senior product director for Johnson & Johnson.24 Confusion, irrelevance, and the high cost of the rigorous measurements of environmental attributes needed for accurate and comprehensive green labeling make some labels dubious investments. These problems arise from a fundamental property of the kinds of information conveyed on sustainability labels and the peculiar economics of labeling.
Somewhere in every large grocery store is a wall of yogurt: arrays of clean white pots of fermented milk with bright labels and alluring images of fruit, happy cows, or a creamy spoonful laced with fruity chunks. The labels often sport words like “organic,” “no pesticides,” “hormone free,” and “no artificial colors,” as well as brand names and slogans. The labels also present presumably factual data about nutrition, ingredients, and allergens. In an ideal world, these multiple elements of the label would help consumers make wise and informed purchases among the large variety of choices. In the real world, many elements of the label are simply meant to entice consumers to purchase that particular yogurt.
This tension between objective information and subjective enticement affects many environmental attributes (e.g., carbon emissions, water use, land use, toxins, and recycling). A 2014 Nielsen survey of 30,000 consumers across 60 countries found that 52 percent of respondents say their purchase decisions are partially dependent on packaging—they check the labeling first before buying to ensure the brand is committed to positive social and environmental impact.25 Such survey responses may or may not be indicative; the mixed effects of labels on consumer purchasing behavior show that exactly how consumers use labeling may not be straightforward.
The diverse text and graphics elements found on a yogurt label, whether intended to inform or entice, illustrate the four categories of information on product attributes that consumers might use to guide their purchase decisions.26 These categories differ in the extent to which consumers can verify the label's veracity.
The first and simplest are search attributes,27 such as the weight of the yogurt, the price of the yogurt, and the form of the packaging. Search attributes are obvious tangible properties that consumers can personally evaluate in the store without ever buying or using the product.
Experience attributes are claims that the consumer cannot verify until after the purchase. These include the stated flavor of the yogurt, the claimed creamy texture, and whether any added fruit is on the bottom or mixed in. The consumer might experience a disappointing discontinuity between a label's image of large plump red strawberries glistening with morning dew and a cup of yogurt containing a few meager grayish-pink sodden lumps. The experience can help foster or degrade the consumer's trust in the label's other claims.
Intrinsic credence attributes28 include the ingredients of the yogurt, calories, and protein content that are inherent to the product but cannot be readily evaluated by the average consumer, even after buying and using a product. Only someone with specialized equipment or access to a laboratory can verify these attributes. They are called credence attributes29 because the consumer must give credence to the label and trust that the maker's supply chain delivered on those hard-to-test claims. Intrinsic credence attributes related to the environment may include the presence of controversial ingredients like palm oil (in a packet of crunchy granola sprinkles) or pesticides in the yogurt.
The final category is hidden credence attributes, which include almost all the environmental impact claims associated with making the product and bringing it to market. While most are stated, some may be implied, such as an image of happy cows in a green pasture under blue skies with the unstated implication that competitors’ cows may live in dark crowded barns reeking of urine and manure. Almost all aspects of environmental sustainability discussed in this book are examples of hidden credence attributes. These include GHG emissions, water use, suppliers’ environmental records, sustainable agriculture, local sourcing, hormone-free cows, and deforestation, among others.
Hidden credence attributes are factors tied to the history or provenance of the product that no test of the product itself can reveal. These attributes can only be verified by someone with detailed and trustworthy historical records of the product's sourcing, processing, and movement in the supply chain, which may be very costly, difficult, or (in many cases) impossible to acquire. Moreover, the degree of consumers’ trust in the label affects a company's incentives to invest in sustainability beyond easy-to-justify eco-efficiency initiatives.
Sustainability attributes, especially of the hidden credence variety, suffer from the same unfortunate economic dynamics as do the quality attributes of used cars. George Akerlof won a Nobel Prize in economics for showing how asymmetries in what consumers and sellers can know about a product (e.g., whether a used car is a defective “lemon” or of high quality) affect the evolution of markets for that product (e.g., sellers’ propensity to offer good versus defective vehicles). Without trustworthy, item-specific information, prospective customers will only pay for “average” performance. But that price would overpay for lemons, making the market unattractive for lemon buyers, and underpay for high-quality cars, making the market unattractive to would-be sellers of high quality cars. Consumers’ inability to estimate the quality of the products would ultimately induce sellers of high-quality products to either leave the market or reduce their quality levels. This erosion of the high-quality end of the supply decreases the average quality level, leading to further price erosion and a potential downward spiral. Carried to the extreme, this phenomenon may damage the entire market as both suppliers and consumers flee the market and its declining prices and quality levels.
In the context of sustainability, if consumers cannot be confident that a product has the claimed environmental quality (e.g., a low carbon footprint, sustainable agriculture, shipping via biofuel hybrid trucks, or packaging made from recycled material), they will be reluctant to prefer or pay more for products making such “green” claims, even if those consumers prize green products. On the other side of the market, if manufacturers cannot garner a premium or additional market share for creating greener products, they will be reluctant to invest in developing, procuring, and manufacturing them. Similarly, they will not invest in a rigorous LCA or other certifications that communicate the green credentials of products. That is, if consumers cannot spot the lemons (or non-green products), soon lemons and non-green products will prevail in the market.
To counter the Akerlof effect in the used car market, high-quality providers can offer warranties, allow product testing, rely on product reviews from trusted sources, or seek product certification from trusted third parties. In the case of environmental attributes, warranties and product testing cannot ensure the status of hidden credence attributes. Thus, to communicate environmental qualities without being subject to Akerlof's curse, companies need to use labels that are both trusted by consumers and readily distinguishable from less trustworthy labels.
According to Stefan Seidel, head of the PUMA group's corporate sustainability, marketing is at an impasse with sustainability: “Our marketing colleagues have said, ‘Look, we have some of these great things for more sustainable products, but we are not really able to communicate them in an efficient way to the consumer because there are so many mixed messages.’” Once a sustainable product or process has been developed, the challenge is to find labels that the company can affordably implement and that consumers will recognize, trust, and value.
“When you put a Rainforest Alliance logo on a box of tea, and people trust that this is grown with good agricultural practices, the feedback we receive from consumers is that the tea actually tastes better,” said Pier Luigi Sigismondi, Unilever's chief supply chain officer.30 A trusted third-party seal assures consumers that the product has been grown and harvested using environmentally and socially responsible processes. “We see it as a business interest, because at the end you get premium tea leaves,” Sigismondi added. The company features its tea sustainability efforts in its marketing campaigns around the world. In the United Kingdom, this increased its PG Tips’ market share by 1.8 points. The company saw similar gains in Australia and Italy, although a more muted campaign in France failed to boost sales.31
In the wake of these gains, other tea brands moved to earn Rainforest Alliance certification. As a result, the NGO estimated in 2011 that it would certify as much as 25 percent of the world's tea crops by 2015.32 The Corporate Sustainability Initiative attributed the rapid growth of the Rainforest Alliance certification, in part, to its easily recognized label and simple binary messaging: A product is either certified or it is not.33 The Rainforest Alliance ensures the trustworthiness of the label's brand by placing strict limits on the use its trademarked logos. Not only must a company's product attain certification, but companies must apply for approval of each specific use of the Rainforest Alliance frog seal.34
In Scandinavia, the Nordic Swan35 emblem is well-recognized and respected by consumers, according to Keith Sutter, senior product director for the sustainability arm of Johnson & Johnson, who secured the Nordic Swan label for its Natusan line of baby skin care products. The Nordic Swan label requires more time and effort than most certifications to achieve and maintain.36 To be considered for the label, a sanitary product brand like Natusan must answer 53 questions and provide supporting documentation. The certification process also includes on-site inspections and escalating requirements over time. The label does not convey any numeric information. Instead, its presence indicates that a product meets and maintains the green standards set by Nordic Swan.
In 1992, the EPA introduced the “Energy Star” label for home appliances. It works by “identifying the top performers and steering consumers towards them,” said Ann Bailey, director of Energy Star product labeling.37 For each appliance category, the Energy Star program periodically reevaluates the prevailing range of energy efficiencies on the market and resets the threshold such that less than 50 percent of the products in each category could qualify for the Energy Star logo at any given time.38 Companies interested in having their products considered for a voluntary Energy Star label then submit appropriate materials to the EPA for evaluation. Since its introduction, Energy Star has expanded to cover more than 60 product categories including refrigerators, dishwashers, lamps, personal computers, printers, and furnaces. In 2012, the EPA claimed39 that close to 80 percent of Americans knew about the two-decade-old label and three-quarters of US households had used it to guide the purchase of a home appliance.40
As with Rainforest Alliance and Nordic Swan seals, Energy Star is a simple binary label and does not distinguish gradations of performance. All three achieve relatively high visibility by being simple, trustworthy, and available on a broad range of products.
Compared to Tesco's black foot carbon label, with its single number (grams of CO2e), the EPA's vehicle fuel economy label is fiendishly complex, with no less than seven numbers related to the carbon footprint of a car. Nevertheless, the label is successful for three key reasons. First, the government-mandated label is universal and has been well-entrenched since 1975.41 Consumers can readily compare any vehicle with any other vehicle, unlike the case of Tesco, which labeled only a tiny fraction of the items it carried. Second, the label expresses environmental impact in salient terms of costs and savings for the buyer rather than an abstract number such as grams of CO2 released into the atmosphere. Finally, the label is defined and managed by the government, rather than the automobile companies themselves, or unfamiliar third parties.
The fuel economy label has grown even more elaborate in recent years.42 Pushed by a congressional mandate,43 the EPA began requiring automakers to measure other pollutants such as nitrogen oxides, particulate matter, carbon monoxide, and formaldehyde.44 The EPA audits those measurements and performs some of its own45 to compute two numerical ratings: one for GHGs and one for smog (on a 1–10 scale).46
A walk through any US appliance store reveals the analog of the fuel economy label for home appliances. Unlike the EPA's binary Energy Star label, the Federal Trade Commission's bright yellow “EnergyGuide” label is mandatory. It provides consumers with both estimated annual dollar operating costs of that model and a graphical depiction of how that model's cost per year compares to the range of costs of competing products with similar capacity and features. EnergyGuide labels are found on many types of appliances such as refrigerators, air conditioners, washing machines, dryers, hot water heaters, and furnaces.47 Collectively, the categories of appliances covered by the EnergyGuide label account for over 60 percent of residential energy consumption, and 13 percent of total US energy consumption.48,49
Besides recognition, trust plays a major role in consumers’ evaluation of eco-labels during their purchase decisions and companies’ subsequent evaluation of investing in eco-labels initiatives. To be trustworthy, Rainforest Alliance and Nordic Swan use rigorous processes including on-site inspections.
The Energy Star and EnergyGuide programs are successful because they are backed by government agencies, which are generally perceived as unbiased. In that regard, corporate lobbying of the government about labeling can detract from this trust, as was the case with the US Department of Agriculture's (USDA) organic labeling guidelines. Miles McEvoy, deputy administrator of the USDA National Organic Program admits, “As the success of organic has expanded, there's been larger food companies that have gotten involved and there's been a fair amount of controversy about what is and what is not organic.” The legislation regulating organic certification, along with a series of votes by the National Organic Standards Board,50 allowed companies to use synthetic ingredients in USDA-certified organic products.51 In response, US Senator Patrick Leahy of Vermont said that trend could “unravel everything we've done. If we don't protect the brand, the organic label, the program is finished,” Leahy added, “It could disappear overnight.”52 If consumers do not trust the “organic” label enough to pay a sufficient premium for it, they will start the Akerlof lemon effect rolling.
The preceding examples suggest that effective labels must meet at least five basic criteria, as follows:
The examples of the attempts by Tesco and Walmart to create environmental footprint labels demonstrate that even the world's largest retailers failed based on affordability. A complete product LCA leading to a legitimate carbon label is too difficult and costly to develop. The Rainforest Alliance and Nordic Swan labels work because they use predefined questionnaires, rather than open-ended analysis of the entire supply chain.
For some credence attributes—both hidden and intrinsic—governments impose mandatory measurement, disclosure, and labeling requirements. Thus, the US government mandates, for example, fuel efficiency and emission labels on cars, and nutrition information on food products. Still, the vast majority of eco-labels (whether Type I or Type II) are voluntary.
In 2012, Apple Inc. decided to remove all of its products from the Electronic Product Environmental Assessment Tool (EPEAT), which is regarded as the main standard for personal computers53 and is managed by the EPA's Green Electronics Council.54 A compilation of approved “green” electronics, EPEAT evaluates and reports information about electronic products that use environmentally sustainable materials and processes.”55 The tool assesses computers on 28 environmental performance criteria and awards Bronze, Silver, or Gold designations if the product meets a sufficient number of criteria.56 Apple felt that EPEAT's measures were outdated and did not include important criteria such as removal of toxic materials.57 Thus, even though Apple had 40 Gold-level certified products listed,58 the company removed all of them from the listings, claiming that their products far surpassed EPEAT's standards.
For exceptionally green brands such as Seventh Generation, the maker of sustainable cleaning products, labeling presents two challenges. The first is that any certification might lead consumers to believe that the company does that and no more, while in reality the company goes much further. “If two products are on a shelf and one meets the standard and one greatly exceeds it, the consumer doesn't know,” said Martin Wolf, Seventh Generation's director of product sustainability and authenticity.59 A second challenge is the overwhelming variety of available eco-labels and the limited availability of space on a product's packaging. “You don't want [the package] to look like NASCAR with all these logos on it,” said Dave Rapaport, former senior director of corporate consciousness for Seventh Generation.60 Limiting declarations, labels, and logos helps reduce clutter. Thus, the company limits the use of eco-labels on its packaging despite the fact that it surpasses the certification thresholds for many of them, ranging from organic to bio-based to using sustainable palm oil.
One of the conclusions from the studies of organic wine61 and CFL bulb labels62 is that taking sustainable actions, getting certification, and labeling are three separate steps that can be evaluated using three separate (and sequential) cost-benefit analyses. Sustainability initiatives by themselves may be justified based on cost efficiencies, some risk reductions, or human resources benefits (see chapter 10). Certification can be communicated in sustainability reports and on the company website to further reduce the risks of NGO attacks or onerous regulatory action. The final step of applying an eco-label to the products themselves might only provide added value if the label sufficiently enhances the product's desirability to green consumers while not having significant negative connotations for mainstream consumers.
The Tesco example shows that sustainability can be a complex story. Sometimes the available space on a product's label is simply too small or too precious to communicate all that a company would wish to promote. Environmental issues are front and center for companies such as Stonyfield Farm, Patagonia, and Seventh Generation. These companies attract employees who believe in sustainability as a cause, and customers who are willing to pay for it. The companies have an extensive and personal story to tell—and that story cannot be summarized in a few words on a product label or with a simple graphic. These companies are committed to being transparent about their environmental progress across the supply chain, mistakes and all. That implies communicating a wealth of information to those consumers who value this degree and depth of information.
“Customers want to hear more about transparency. They want to hear about provenance and where the food is from,” said McDonald's Chief Executive Officer Don Thompson during an earnings call in October 2013.63 Beginning in 2012, news reports highlighted an ingredient used in the processed meat industry called “mechanically separated meat” by the industry but referred to as “pink slime” by detractors. When a consumer asked McDonald's if they used this in McNuggets,64 the company did more than just say “no”: it made a video detailing the McNugget manufacturing process inside one supplier's (Cargill) facilities. “Our latest videos aim to combat the misinformation and tell the truth about this iconic product—that Chicken McNuggets are made from chicken breast, a few seasonings, along with a natural proportion [of] skin, used both for flavor and as a binder,” said Gema Rayo, McDonald's spokeswoman.
Other companies have voluntarily started to disclose additional information about the ingredients in their products. Clorox, for example, uses its website to summarize the kinds of ingredients in its “Green Works” line of cleaners. In some cases, it lists the actual ingredient, such as ethanol or alkyl polyglucoside. In others, it lists only the type of ingredient, such as “preservative,” or “fragrance with essential oils.”65 Clorox did not apply the same level of disclosure to its mainstream cleaners. For example, in late 2013, the web page for Clorox Clean-Up Cleaner + Bleach included an “Ingredients & Safety” section, but it focused entirely on how to safely use the product and did not disclose the product's ingredients.66
Whereas McDonald's and Clorox provide general information and stories about the types of ingredients and manufacturing processes used, some companies go beyond generic information to provide a very specific breakdown. In 2008, berry producer Driscoll's introduced a new program, “Follow Us to the Farm,” letting consumers trace berries back to the specific farm and date of harvest for their berries. Each clamshell container of Driscoll's berries has a 16-digit code on the label that curious consumers can enter at the company's website. “Food safety is an utmost priority in our berry-growing operations, and clamshell-level traceability is a natural extension to our existing initiatives to ensure the integrity, consistency and quality of our products and services,” said Miles Reiter, Driscoll's chairman and CEO.67
Other companies use QR codes—square patterns of dots that smartphones can scan— that take the consumer directly to the website encoded by the tag pattern. In Tesco's Lotus hypermarkets in Thailand, the retailer has put QR code tags on 80 percent of pre-packed fruit, vegetables, and meat. “They allow customers to see exactly where their food has come from—which farm and which batch—as well as nutritional information and recipe ideas to help customers to balance their diet; all with a quick scan from a smartphone,” said Pornpen Nartpiriyarat, head of trading law and technical at Tesco Lotus.68 Tesco's system was facilitated by Thai government standards that require traceability of animal and agricultural products.69
Companies also use these traceability labels to create a social connection between consumers and farmers70 or fishermen.71 NGOs use this same technology; Buycott.com offers an app that scans a product's label and informs consumers of the company's ownership and any boycott campaigns that the consumer can then pledge to join right from the app.72
About three-quarters of the energy consumption and GHG emissions from washing a load of laundry arise when the consumer heats the water.73 For that reason, the biggest single contributor to P&G's corporate GHG emissions footprint is the energy used during machine washing.74 To reduce that impact, P&G developed Tide Coldwater in 2005 and set a 2020 goal to have 70 percent of laundry loads done in relatively cold water.75 Other manufacturers joined the fray; for example, Henkel released Purex ColdWater Ultraconcentrated.76
Consumers, however, have not been easily convinced. Tide Coldwater appeared on store shelves in 2005, but six years later the share of laundry done in hot water remained unchanged; Tide Coldwater sales were stagnant, despite P&G being the market leader.77 Although Tide Coldwater was by far the best-selling cold-water detergent and accounted for $210 million in sales in the United States and Canada as of 2011, regular Tide outsold its cold-water cousin almost 8:1.78 In fact, thermal energy is one of three secrets to cleaning clothes, along with mechanical energy and chemicals. To use less thermal energy, manufacturers turned to new chemicals and enzymes. But most consumers—even the environmentally conscious Germans—were not convinced. “When you ask consumers, they currently don't see the immediate benefit of saving energy,” said Thomas Müeller-Kirschbaum, a senior vice president for research and development at Henkel, the German company that markets cold-water formulas under the Persil and Purex brands.79
To increase adoption, P&G and others launched concerted consumer education efforts. These included a “30°C” (30°C = 86°F) icon on laundry detergent packages (the average wash temperature in Europe is 41°C, or 106°F80), an industry-led “I prefer 30°C” consumer education campaign, and a partnership with appliance makers to include instructions on the benefits of cold water washing with new washing machines.81 Retailers and garment manufacturers also participated. Walmart, for example, has changed nearly three-quarters of the labels on the clothing it carries to say “machine wash cold” rather than “warm” or “hot.”82 And Chip Bergh, CEO of Levi Strauss & Co., also encouraged consumers to wash their jeans less frequently—he even suggested never washing them; just occasionally freezing them to kill any germs. (This may not be true; freezing jeans may put germs in a dormant state, but it does not kill them.83) Berg made this statement during a May 2014 Fortune conference, while wearing the company's iconic 501 jeans that, he claimed, were “a year old and have never seen a washing machine.”84 The effort may be slowly changing consumer behavior. Overall, between 2010 and 2014, machine loads washed in cold water increased from 38 percent to 53 percent globally (led by Europe), according to P&G.85
P&G may have an easier time selling the cold-water concept as an eco-efficiency initiative to financially minded institutional customers, such as hotels. The company launched its “Tide Professional Coldwater Laundry System” with a suite of four products: a near-neutral pH detergent, a fabric softener, a bleach, and a whiteness enhancer. The company claims that for the average 150-room hotel, the product can reduce water use by 40 percent, energy use by 75 percent, and linen replacement by 15 percent. The laundry system won a 2015 Silver Edison Green Award, which recognizes organizations’ efforts to reduce their carbon footprint and create “green collar” jobs.86
When Boots, a UK-based pharmacy chain, assessed the life cycle impacts of its shampoo, it found that 93 percent of the total impact took place during the consumer use phase, from the energy used to heat water.87 New packaging released in 2007 included a Carbon Trust label and said, “You can help too. Using cooler water to wash your hair cuts CO2 emissions, reduces your energy bills, and is actually better for your hair.”88
Despite its best efforts, Boots witnessed little consumer recognition of the Carbon Trust label, and the pharmacy chain was unable to gauge whether its shampoo ads were causing any behavioral change. Only 28 percent of its customers seemed to have understood that the Carbon Trust label was linked to climate change. Moreover, almost half of the people surveyed confused it with Fair Trade, an entirely different label.89
Other corporate efforts to change consumers’ behavior include Unilever's “Project Sunlight,” which solicits and displays crowdsourced ideas on a website.90 These ideas include taking shorter showers (the “two songs” challenge), suggestions on recycling, air-drying hair, and so forth. Similarly, Levi's put a tag on its jeans, encouraging consumers to machine wash cold, line dry when possible, and donate when done with them.
BASF's 2014 annual report91 illustrates another major category of sustainability communications—the annual reporting of environmental and social indicators of the company's performance to stakeholders. The principle audiences (and motivations) for this reporting include investors (to assuage environmental risk concerns and entice socially responsible investors), NGOs (to avoid attacks), and governments (to forestall heavy regulation). Although some companies publish separate “environmental sustainability” or “corporate social responsibility” reports, BASF integrates its financial, environmental, and social responsibility reporting into one document. The company combines the two because they have the same audience, allowing the company to present “how sustainability contributes to BASF's long-term success and how we as a company create value for our employees, shareholders, business partners, neighbors, and the public.”92
Near the beginning of its annual report,93 BASF presents a series of “at a glance” numerical tables of various financial, social, and environment performance indicators (including percentage change from the previous year). The data includes 15 environmental sustainability metrics. Published consumption metrics include energy usage, energy efficiency, total water consumption, and drinking water consumption. The company reports its total emissions of GHGs, other air pollutants, nitrogen in water, heavy metals in water, and organic substances in water as separate line items. Other metrics cover emissions audits, spills, waste, and spending on environmental protection.
The bulk of BASF's 276-page report intermingles discussions of sustainability issues into presentations of the company's activities, finances, and management issues. The report presents BASF's progress on 20 high-level goals for 2020, of which nine relate to sustainability. The report also delves into BASF's materiality analysis of the environmental impacts important to the company and its stakeholders (see chapter 3). Finally, the report cites BASF's sustainability accolades for the year, such as its 14th consecutive inclusion in Dow Jones Sustainability World Enlarged Index, which lists the top 10 percent of companies in terms of their sustainability credentials among the 2,500 largest companies in the S&P Global Broad Market Index.
As mentioned in chapter 8, much of BASF's report focuses on the company's efforts to produce products that improve the sustainability of its customers and their products. More generally, BASF's report describes the “thorough analysis we conducted of our products in more than 60,000 applications” using the Sustainable Solution Steering method94 to understand which products impact sustainability.
As of 2015, only a few countries mandated sustainability reporting. In France, for example, Article 225 of the Grenelle II Act95 required French companies with 500 employees or more to include third-party verified environmental, social, and governance indicators in their annual reports.96 Although not actively enforced, the Grenelle II Act can be used as a basis for legal action by stakeholders. Other countries with similar policies include Denmark, South Africa, and China.97 In most countries, unlike financial reporting by public companies, the reporting of sustainability efforts and performance by public companies is voluntary.
BASF prides itself on disclosure, citing its perfect 100 score on the Carbon Disclosure Leadership Index (CDLI) in its annual report. Moreover, BASF's annual report is just a gateway to further detailed reporting on sustainability issues in a section of the company's website dedicated to sustainability.98 Publicly stated goals both inform outside stakeholders of internal commitments and foster external pressure on the company to meet those goals.
At UPS, such pressure to accomplish publicly announced goals is welcome, according to Scott Wicker of UPS, the vice president of global plant engineering and sustainability. UPS is proudly dominated by an engineering culture—metrics are the company's bread and butter. Along with other early adopters, the global logistics company started disclosing its environmental progress in 2003. According to Lynnette McIntire, UPS' manager of sustainability communications, this was a natural step. “We recognized that sustainability reporting was important and realized we could do this, because, in fact, we were already measuring all of these things,” she said.99
Comparing the sustainability reports of any two companies highlights a current limitation of those reports and the challenge facing the stakeholders who read them. Whereas financial reports to investors have well-codified, regulator-approved international accounting standards for the structure of the report and the meanings of individual items in these reports, sustainability reporting is not standardized. In fact, a number of competing third parties offer different sustainability reporting frameworks.
A 2013 survey of sustainability executives found that the top three reporting frameworks are CDP (formerly known as the Carbon Disclosure Project), GRI (Global Reporting Initiative), and DJSI (Dow Jones Sustainability Indices).100 CDP, for instance, claimed to have 5,000 companies reporting under its framework in 2014; it focused its efforts at that point on increasing reporting by suppliers. The GRI standards were being used by 80 percent of Fortune Global 250 firms, according to a 2011 survey performed by the audit, tax, and advisory services firm KPMG.101 BASF and many other companies report under more than one framework, often in response to customer mandates to use a particular framework. To reduce duplication of efforts associated with reporting under the two different frameworks, the CDP and GRI have published a guide that aligns the two,102 and DJSI announced that it will use the CDP's questions for the climate change portion of its survey.
“The truth is rarely pure and never simple,” wrote Oscar Wilde,103 a statement that applies doubly to both corporate claims of sustainability and activists’ claims of corporate environmental malfeasance. The term “greenwashing” refers to misleading promotion of the environmental performance of a product or a company through selective or deceptive claims or messages. A quick online search of the term “greenwashing” uncovers a steady stream of journalists, activists, NGOs, and bloggers attacking companies for misrepresenting or overstating the sustainability of their products or corporate activities. Examples include articles calling out Sunlight's Green Clean laundry soap (promises “plant-based cleaning ingredients,” in spite of the fact that the cleaning ingredients are 38 percent petrochemicals), Upper Canada's Eco Collection bath mitt (which uses harsh chemical processing to soften the mitt's bamboo fibers), and Eco Solutions’ Organic Melt ice remover (the misleading label hides the fact that it is 97 percent mineral rock salt).104 “It's like a tsunami of greenwash really,” said Adria Vasil, a columnist and author of the Ecoholic book series.105 The prevalence of greenwashing, or at least claims of greenwashing, may be why 88 percent of consumers believe companies share positive information about their corporate social responsibility efforts but withhold negative information.106
NGOs and journalists attack companies for greenwashing not only when the company makes false claims (which may actually result in lawsuits and fines over misleading advertisements). Even if the claims are true but the company falls short on other dimensions of sustainability, NGOs may claim that the company greenwashes by failing to be unbiased and transparent about both the good and the bad aspects of the company's actions. One company might tout its carbon footprint reductions but pollute local streams and rivers with toxic waste. Another might claim an eco-label certification that offers only weak protections of forests and habitat. A third might declare the environmental benefits of one ingredient in the product while ignoring the environmental impacts of other ingredients. Note that just being lax about the environment does not amount to greenwashing. Rather, putting a green spin on weak environmental performance is the essence of greenwashing.107
In 2007, bottled water manufacturer Fiji Water announced plans to become “carbon negative” by offsetting 120 percent of its carbon footprint.108 The following year, the company reported that it planted 250 acres of rainforest as a carbon offset under the guidance of Conservation International.109 Although the company's press release disclosed that it would not achieve a 120 percent offset until the planted trees had grown for 30 years,110 this detailed explanation of the long-term nature of the offset was not on the brand's labels. Fiji stated that the environmental nonprofit Conservation International guaranteed the quality of its carbon credits and that the consulting firm ICF International verifies its emissions data every year.111 Nonetheless, environmentalists attacked Fiji's use of “forward credits,” whereby the company claimed credits for future carbon offsets. Fiji Water was forced to recant its environmental claims in 2010, as a result of a California class action lawsuit regarding its claim to be “carbon negative.”
In 2011, Fiji Water was again attacked for misleading labels. In the California First District Court of Appeal in San Francisco, Ayana Hill claimed that the image of a small green leaf on the Fiji bottle led her to believe that it was a third-party certification. She argued that this symbol made it seem that Fiji was claiming it was environmentally superior to its competitors, when in fact the symbol was meaningless.112 As it did with the “carbon negative” label lawsuit mentioned earlier, Fiji settled the suit quietly and removed the leaf from the bottle.
SC Johnson & Son Inc. also settled two lawsuits claiming that the company's internally created and managed “Greenlist” logo misled consumers into believing that the logo had been issued by a trustworthy third party.113 The Greenlist, which SC Johnson created in 2001, rated chemicals on a 0 to 3 scale, with 3 being best for the environment. In 2008, SC Johnson added a Greenlist logo to its Windex glass cleaner.114 Within months, the first of two civil suits against the company was filed. One plaintiff noted that he and other customers paid a 50 percent premium for Greenlist-labeled Windex over similar products that didn't “misrepresent” themselves.115 Note that the lawsuit did not attack the environmental qualities of the Greenlist ingredients themselves but instead focused on the perceived misrepresentation that Greenlist was an independent evaluator of the environmental claims. As a part of the resulting settlements, SC Johnson paid an undisclosed amount to the plaintiffs and removed the logo from its products, although the company still uses the list in promotional materials.116
After PepsiCo Inc. acquired the Naked brand of juices,117 the company continued to advertise it as “all natural.” Furthermore, it marketed it as “the freshest, purest stuff in the world.” In 2011, plaintiffs filed a class action suit against the company, claiming that the drinks contained zinc oxide, ascorbic acid, and calcium pantothenate, in addition to genetically modified (GMO) ingredients (at odds with the “all natural” language of the labels). In July 2013, PepsiCo agreed to settle the case, paying $9 million and ceasing to label the juices as “all natural.”118
To help prevent misrepresentation of environmental claims, the US Federal Trade Commission (FTC) released the “Green Guides” in 1992 and an update in 2012.119 The Green Guides are designed to “help marketers avoid making environmental marketing claims that are unfair or deceptive.”120 Despite the FTC's best efforts to clarify marketing and label claims, the Green Guides may have actually worsened the complexity and confusion in defining these claims.
The Green Guides use hypothetical examples of products and potentially misleading labels to illustrate acceptable and unacceptable practices. In one sample scenario, they describe a window cleaner labeled as “Environment Approved” bestowed by a credible third-party organization based on passing 35 environmental indicators defined by that organization. But because the label suggests that the product is categorically better for the environment without specific qualification, it may be misleading to consumers. Instead, the FTC argued that a label must include moderating language such as “Virtually all products impact the environment. For details on which attributes we evaluated, go to [a website that discusses this product].”121 Of course, such detail may doom any label, making it too long and complex.
After examining a draft of the FTC's Green Guides in 2010, the EPA pointed out that under this definition, the EPA's own label “Design for the Environment” would be misleading to consumers and subject to attack.122 With two federal agencies at odds over what constitutes misleading claims, the boundary between acceptable and unacceptable labeling remains unclear, and so communicating environmental information is fraught with ambiguities and risks.
Although environmental NGOs want to project the image that they are fighting for the good of humanity, they also compete with each other for media attention, donor dollars, volunteers, and market share in the certification space. Both Rainforest Alliance and Fair Trade offer certifications for commodities such as tea, coffee, and bananas. Although both claim to address the social and environmental challenges facing farmers and farming, these two compete for companies seeking eco-label certification. The NGOs also disagree on some specifics of their respective certifications. The fair trade movement attacks Rainforest Alliance for not mandating fair prices to producers and higher wages for workers.123 For its part, Rainforest Alliance cites studies showing that farms following its protocols enjoy higher agricultural yields that simultaneously reduce land-use impacts and increase the revenues and profitability of smallholder farms.124
When EDF partnered with Walmart (see chapter 10), other NGOs attacked it. This may illustrate legitimate disagreements over the ethics and effectiveness of different NGO strategies—EDF's collaborative strategy with Walmart aimed at effecting change from the inside versus Greenpeace's attack-from-the-outside strategy aimed at forcing a company to change. But these disagreements might also be environmental theater—scoring points with green supporters by appearing to be “greener” or more effective in their green efforts than the other NGOs. With so many different dimensions of sustainability (such as carbon, water, toxins, biodiversity, and waste), almost any company and even any NGO can be attacked for perceived shortcomings on some dimensions. The complexity of modern products and global supply chains—along with the incentives for activists, NGOs and journalists—makes it almost inevitable that someone will claim to find a problem somewhere along the supply chain, regardless of all efforts by the brand holder.
In 2010, TerraChoice, an environmental consulting and marketing firm, released the third edition of a widely distributed and commonly cited report titled, “The Sins of Greenwashing,” published in both English and French.125 The firm looked for instances of greenwashing by documenting 12,000 claims on 5,300 products and evaluating each claim against seven criteria of environmental marketing, as defined by TerraChoice. If the claim failed one of the criteria, it was then categorized as one of seven “sins,” such as “Sin of No Proof” or “Sin of Irrelevance.”126 The unsurprising result was TerraChoice found that 95 percent of products failed the evaluation and were guilty of greenwashing based on its methodology.127
However, in TerraChoice's race to convict companies of greenwashing, TerraChoice became guilty of many of the same “sins.” TerraChoice offered no proofs of the companies’ wrongdoing (“sin of no proof”); they derided deceptive claims (“fibbing”) even though they are against the law anyway (“sin of irrelevance”); the report classified products as “sinners” without more information or identification (“sin of vagueness”); and so forth. Furthermore, all TerraChoice claims in the report were based on the opinions of TerraChoice's own researchers, rather than on unbiased outside data. These flaws and others were pointed out in a commentary by Joel Makower of GreenBiz, an environmental reporting website.128 He noted that TerraChoice only provided unverified, subjective measures of how to classify products guilty of greenwashing. Corporations sometimes exaggerate their environmental sustainability credentials, but environmental organizations also sometimes exaggerate their cries of environmental malfeasance and greenwashing. “You are going to be accused of greenwashing whether you do or not,” said Kathrin Winkler, senior vice president, corporate sustainability and chief sustainability officer at EMC.129
In early 2015, a viral video swept the Internet. “Kill the K-Cup” was an apocalyptic two-and-a-half-minute film depicting Keurig's K-Cup coffee pods raining down and destroying the Earth.130 The video spawned a “KillTheKCup” hashtag on Twitter and led to copycat videos of people throwing their Keurig machines out of windows or bashing them with baseball bats.131 The video relied on evocative statistical facts such as that the annual production of nine billion discarded K-cups would encircle the world 10.5 times. Yet this statistic relied on the innumeracy of the viewer, who may not realize that the Earth is so large that nine billion K-cups is only a scant one K-cup per 14 acres on Earth.
An article in Mother Jones derided K-cup users for not simply making a plain old pot of coffee,132 not realizing that the standard drip coffee maker is actually environmentally worse than the K-cup.133 Drip coffee makers require more energy and water per cup because they are often left on for hours to keep the coffee warm, and, typically, 10 to 15 percent of the pot is thrown out. Even worse, a drip coffee maker is less efficient at extracting the flavor of the coffee than the K-Cup and thus needs more coffee grounds per cup. When considering the full life cycle of coffee growing and coffee making, the invisible supply chain before the coffee gets to the consumer matters more than the visible pile of K-cups in the trash. In requiring more coffee grounds per cup, drip coffee makers have a higher impact on the sensitive ecosystems where coffee is grown (including deforestation for coffee plantations, water use, pesticide runoff, and carbon emissions from shipping coffee beans around the world).134 Interestingly, an LCA found that instant coffee has the lowest carbon footprint because instant coffee factories extract flavor very efficiently, dried coffee crystals are lighter to ship than beans, and instant has the cup-by-cup convenience that avoids the waste of leftover old coffee in the pot.135
The attacks on K-cups could be termed “blackwash”—the flipside of greenwash—attacking companies who are actually selling products with reduced environmental impact, or attacking them for small and insignificant fractions of the impact of their products and their operations. This was also the complaint of José Lopez, who was responsible for Nestlé's manufacturing at the time of the Greenpeace attacks on KitKat. As mentioned in chapter 1, his comment was, “You would have to ‘look through a microscope’ to find the palm oil in the snack.”136
Ironically, “misinformation campaigns by both corporations and environmental groups threaten to undermine efforts to conserve biodiversity and reduce environmental degradation,” according to a 2009 paper published in the journal Biotropica.137,138 The competing and overhyped claims and counterclaims erode consumers’ trust in both companies and NGOs, hampering consumers’ ability to interpret all types of hidden credence claims about sustainability. Such mistrust may lead to the Akerlof effect, which may reduce companies’ incentives to curtail their environmental impacts.
Diageo Plc's experience illustrates the difficult interplay between claiming and actually doing, or “walking the talk.”139 In 2008, the global spirit maker announced eight environmental goals for 2015, including a 50 percent reduction in carbon footprint and wastewater levels. But when the deadline arrived the company had reached only a 33.3 percent reduction in carbon emissions and a 45.3 percent reduction in wastewater levels, and missed targets on five other goals. Friends of the Earth Scotland accused the company of failing “miserably.” Diageo was further criticized for using corporate jargon when it said that these had been “stretch goals” and that sustainability was a “journey.”
Even so, the company did reduce its environmental impact, despite falling short of its ambitious goals. “We set targets with a view to making a real contribution as to how the business performs not just now but where it needs to be for the world of tomorrow,” said David Croft, global sustainability director at Diageo. If Diageo had set goals of a 25 percent reduction in carbon and wastewater levels, it would have been lauded for exceeding them.
This kind of criticism by environmental groups, journalists, and pundits makes companies more conservative in defining sustainability goals. At HP, Shelley Zimmer, who is responsible for social and environmental responsibility policy across all HP product groups, said, “We still say a lot less than what we are capable of. There's always the concern about greenwashing and not wanting to over-promise.”140
Ultimately, to avoid being accused of greenwashing, a company's activities must place bounds on its communications. When Walmart embarked on its major sustainability push, CEO H. Lee Scott Jr. said, “It wasn't a matter of telling our story better. We had to create a better story.”141
