ENVIRONMENTAL POLICY
8.7 Eco-labelling: business fails to embrace ecological modernisation?Eco-labelling is a voluntary system that seeks
to harness market forces by helping consumers
identify products that are less harmful to the
environment. Manufacturers pay for the right to
display a logo demonstrating the ‘greenness’ of
their products. If this logo proves attractive to
consumers, then other manufacturers have a
market incentive to make their products
greener – a clear example of the ‘pollution
prevention pays’ principle. The widespread use
of eco-labelling would be an indicator that
industry was absorbing the message of
ecological modernisation.
Some eco-labelling schemes have proved
relatively successful, but most have not. The
German Blue Angel label had been awarded to
over 3,600 products produced by 580
companies in March 2006, encouraging
innovation and diffusion in some product
categories, including returnable bottles,
recycled paper and heating appliances (M ̈uller
2005 ). The EU scheme launched in 1992 has
had a more limited impact: by February 2006
just 289 companies had been awarded a
licence to use the ‘Flower’ symbol. Italy topped
the list with eighty-two companies, but only fiveUK companies had a licence. The most popular
products with the Flower were textiles, paints
and varnishes, and tourist accommodation.Problems- Eco-labelling depends on the willingness of
industry to compete for the logo, but trade
associations dislike schemes that pit their
members against each other or might
impose new costs on them. Consequently,
many industry trade associations have
lobbied against the introduction of
eco-labelling schemes or persuaded their
members to boycott them once in place
(Harrison 1999 ). - Opponents of eco-labelling, including many
less developed countries, argue that the
criteria used to award eco-labels are biased
in favour of domestically produced goods,
i.e. they are a barrier to free trade (and flout
World Trade Organisation (WTO) rules).
Blue Angel website: http://www.blauer-engel.de/
EU eco-label website:
http://europa.eu.int/comm/environment/ecolabel/
indexen.htm.prevention pays’ message has been absorbed, individual firms may still make
theeconomic calculation that the costs of greening outweigh the benefits.
Certainly, the transaction costs of green innovations may be significant:
investments in new cleaner technologies are likely to be ‘lumpy’, requiring
amajor short-term expenditure in anticipation of long-term benefits. Firms
may be reluctant or unable to make such a commitment, especially if it
threatens short-term competitive advantage.
Consequently, several writers have argued that progress in greening indus-
try is most likely to occur at the sectoral level (Porter 1990 ;Press and Mazma-
nian 1999 ). Here the transaction costs of change can be reduced by sharing
thefinancial burden and integrating technical expertise so that industry-
wide networks of companies can gain sectoral advantages in the global mar-
ket. If an entire sector acts in unison then the problems of collective action
are reduced; individual firms are more likely to innovate if they believe their
direct competitors will too. In the USA, one sector where such voluntary