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Summary of full report
Driving Environmental Improvement with Marketplace Benefits from Environmental Labelling
by Phillip Toyne, Claudia Cowell and Thea Mech
June 2004
RIRDC Publication No 04/050 RIRDC Project No EAR-1A
Executive Summary
The key aim of this report
is to investigate whether Australian agricultural produce can be marketed
as verifiably sustainable by developing an environmental labelling or branding
scheme for food and fibre products that has consumer credibility, global
market recognition, and is cost-effective. To this end, the report explores
the potential and the practicalities of environmental labelling and branding
schemes for food and fibre products as a means of marketing agricultural
sustainability.
Globally, consumer demand for safe, clean and green food has been sharpened by human and animal disease outbreaks and associated health scares, concern over the appropriate use of agri-chemicals and antibiotics in agri-food production, consumer unease, most notably in Europe, over the use of genetically modified organisms (GMOs) in farming, and various highly publicised animal welfare issues. Consumer concerns regarding the environment, food safety and quality, genetic modification and animal welfare are fuelling the emergence of a diversity of standards-based labelling and branding schemes. The report discusses these concerns. It also distinguishes between environmental labelling, eco-labelling and environmental branding schemes on the one hand, and environmental management systems (EMS) certification on the other, which alone cannot result in product labelling or branding.
These consumer concerns, real and perceived, regarding the environment, food safety and quality, genetic modification, have generated a diversity of responses from producers and processors.
Together, consumer-driven and industry-initiated activities include a diversity of standards-based labelling and branding schemes, the establishment of voluntary partnerships, including binding environmental contracts, between different stakeholder groups, and the rising popularity of organic farming worldwide.
There are different types of environmental labelling, certification and branding initiatives in the agrifood sector. This report categorises environmental assurance schemes as labels and brands developed by individual by farmer-entrepreneurs, labels and brands developed by farmer associations, regional labels and brands, independent third-party certification for environmental, food safety and quality assurance, and supermarket brands.
The environmental standards or criteria, which are audited in environmental labelling schemes, determine what claims can be made and how much public assurance can be provided. The nature of the audit, whether it is conducted internally or externally or both, and the nature and identity of the body or authority conducting external auditing and making labelling recommendations and decisions, conveys different messages in the marketplace regarding the levels of certainty, even trustworthiness, associated with the environmental claims made.
Environmental assurance schemes that enjoy currency in the marketplace are typically based on production-oriented standards, thereby allowing for product labelling. The fact that EMS certification, i.e.: compliance against the ISO 14001 process standard, may not be used for product labelling explains why linked environmental-marketplace benefits are proving elusive to find with EMS in agriculture. It also explains the rising use in agriculture of standards-based environmental assurance schemes, typically other than ISO 14001.
A number of major international food retailers are supplying customers with environmentally differentiated, including organic, food products. Indeed, in the UK, it may be said that all the major food retailers are seeking to differentiate themselves on environmental grounds in the drive for market share. The growing demand, and market mainstreaming, for food differentiated on environmental and health grounds, is most notably evident in Europe. Importantly, the retail locations where such food products are available are changing, with the sale of environmentally differentiated, including organic, food diverting from traditional suppliers such as health food stores, to larger and more mainstream supermarkets.
The importance of business-to-business supply chain drivers in driving the spread of environmental assurance schemes is evident in the trends among international food retailers. For example, Sainsbury’s UK supermarkets encourage on-farm wildlife conservation via the implementation of Farm Biodiversity Action Plans, with all farms supplying this retailer envisaged to have these plans by 2006. Sainsbury’s has also launched the EUREP-GAP standards to all overseas growers supplying fresh and frozen produce.
Diverse reasons why companies are driven to environmental assurance activities include supply chain drivers, NGO campaigns, shareholder activism, and bad public relations. Some simply may read the community mood and see a need to shore up their ‘community license to operate’. Some take a precautionary approach to protect markets and stay in front of government regulation.
The specific reasons why companies undertake environmental assurance activities determine the type of activities that are engaged in. For example, for the purposes of stakeholder management and good PR, companies are more likely to choose to implement a certified and widely publicised and communicated EMS that seeks to address specific matters of public concern, and which may form the basis of environmental performance reporting. Other companies seeking to grow and maintain market share for environmentally differentiated products are more likely to engage in environmental labelling and branding schemes.
While a number of environmental assurance schemes enjoy success in the marketplace, overall the market forces driving environmental standards development are not strong, and public concern over environmental issues and consumer behaviour in buying environmentally differentiated products are not identical.
Farmers need to be interested in the environmental labelling, branding or certification scheme in question. This is the forgotten end of environmental assurance. Without broad producer uptake, the market cannot be supplied. This raises issues for production standards. For example, if the bar is too high, too many producers will be excluded. If the bar is too low, there will be little competitive advantage for producers, and the label may not enjoy consumer confidence.
The success of a label in the market depends on consumers’ interests in the issues behind the label.
Organic food certification, for example, is enjoying growing success in the marketplace, and is driven predominantly by consumer health concerns, with other factors such as consumers’ understanding of the environmental aspects of organic farming coming third or fourth in the order of importance after healthfulness, price, quality, availability.
Environment labeling schemes, which are not well marketed and fail to explain the claim, the logo or trade mark and the verification system are likely to fail. To market Australian agri-food products as verifiably sustainable, there is a need to undertake detailed market research in order to establish the potential for labelling and branding schemes addressing environmental issues of consumer concern in specific food and fibre sectors and markets. Having established this, the development of environmental standards for food and fibre production upon which labelling and/or branding schemes are based would be necessary. The multi-stakeholder consultation processes that led to the development of the Marine and Forest Stewardship Council standards, and that are leading to the development of the Green Lead standards, provide good examples of industry leadership in standards development, as well as broad multi-stakeholder input to address wide-ranging environmental issues of public concern.
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