The number of new eco-label programs aimed at environmentally conscious consumers has grown rapidly — with little quality control. By applying a three-part framework, managers can avoid betting on the wrong label.

The number of eco-label programs has grown from a mere dozen worldwide in the 1990s to more than 435 today in 197 countries and 25 industry sectors, according to the Ecolabel Index directory. But this growth has been accompanied by a high degree of consumer confusion and organizational skepticism. For example, consumers have admitted to difficulties recognizing the differences among the six-plus eco-labels for coffee. And in 2009, Ecover, a Belgium-based manufacturer of cleaning products, boycotted the European Union Eco-label, claiming lax standards allowed entry to subpar performers and harmed the company’s superior environmental credentials. In early 2012, the British supermarket chain Tesco PLC dropped the United Kingdom’s Carbon Trust label, citing prohibitively high costs and minimal consumer recognition.

However, there is no denying that the value of eco-products — and the recognition of certain eco-labels — is growing. For example, in the United States, retail sales of organic foods increased from $3.8 billion in 1997 to $29.2 billion in 2011. Moreover, nearly four of five U.S. households recognize the Energy Star label, which is a joint eco-label from the U.S. Environmental Protection Agency and the Department of Energy. In fact, American consumers have purchased more than one billion Energy Star-labeled products.

What might explain such variations in value and recognition? Why are consumers drawn to certain eco-labels over others? In this article, we attempt to answer these questions using a framework that evaluates eco-labels along three dimensions: consumer understanding and awareness, consumer confidence and willingness to pay. By applying this framework, managers can avoid betting on the wrong label.

Consumer Awareness and Understanding

Choose eco-labels with simple and clear messages to consumers. Based on research about consumers’ perceptions of the Energy Star label, the label was modified to increase its clarity. The update included adding the words “Energy Star” to each label and consistently using a strong, clear blue color. Clear messaging also allows organizations to avoid the greenwashing sin of vagueness. For example, an ad for Clorox Green Works claims that the product is made with ‘natural’ ingredients, without ever naming the ingredients used.

Choose labels that allocate resources to the communication of their label.

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