Pavel Castka and Charles Corbett
The number of voluntary labels certifying some environmental and/or social attributes of a product continues to grow, and is already well past the point where most consumers are quite confused about how to choose between them. In buying coffee, should I focus on it being “certified organic”, should I look for a “Fairtrade” label, or for the Rainforest Alliance Certification? When buying household cleaning products, should I look for the Cradle-to-Cradle logo, or the Green Seal? These questions are being asked throughout the supply chain: by consumers, but also by the retailers who pre-select products for the consumers, by the manufacturers who choose which labels to pursue, and by farmers and other providers who have to decide which labels’ requirements (if any) to adhere to.
We cannot answer the question at the top, but if we rephrase the question to “which eco-label has the best governance?”, we can say a bit more. The issue of trust (or credibility) of eco-labels is critical to the entire ecosystem involved with these labels: the “owners” of the labels themselves, the auditors who determine whether a product or firm complies with the label’s requirements, the accreditation agencies who oversee the auditors, the consultants who help firms meet the requirements, and the governments and NGOs who also play various roles. One leading organization in this space is the ISEAL Alliance, which recently published principles for voluntary social and environmental standards to be credible and effective. Those principles are sustainability, improvement, relevance, rigor, engagement, impartiality, transparency, accessibility, truthfulness, and efficiency. It is impossible to excel on ten dimensions at once, and it is difficult to know how to make trade-offs between these principles. A label might have a governance system that is very efficient, which therefore extracts the minimum amount of money possible from participating organizations and is hence highly accessible, but that efficiency may come at the cost of lower enforcement of correct use of the label, hence lower truthfulness. In any event, important as each of these attributes are, they are not readily quantified; each of the principles is worth striving for, but there is no guidance of which specific attribute weighs more or less heavily when evaluating an eco-label.
Some attributes of labels are relatively easily discernible. For some labels the audits may involve third-party audits by accredited verifiers and mandatory visits to field sites, while other labels may only require second-party verification and inspection of documents. Some labels involve a chain-of-custody requirement, while others do not. For some labels, the standard-setting process is open- and consensus-based, while in other cases it is done in a more private manner. Do these practices matter in making a label more or less credible overall? To answer this question, we surveyed a collection of experts in the eco-label world, from major retailers, corporations, government agencies, NGOs, consumer groups, and consultants, from the US and Europe. We presented them with a list of 40 different eco-labels and asked them how well-governed they considered each label to be. We combined this with data from www.ecolabelindex.com and other sources to determine whether a label required third-party audits, field site visits, etc. What we found was that most of those governance practices did not seem to make a difference in the experts’ overall assessment of a label. Requiring field site visits, chain-of-custody, or having an open- and consensus-based standard-setting process were not associated with better governance overall. Even having third-party audits, by itself, did not make a difference; only the requirement that the auditors themselves had to be accredited was associated with better governance.
What does this mean? Our interpretation is that the experts recognize that any one of these practices and requirements, though they sound good in themselves, can be implemented in more or less meaningful ways. For instance, if experts know that the “field site visits” required by a particular label are in fact very cursory affairs, the mere presence of that requirement will not contribute to a perception of better governance. Open- and consensus-based standard-setting is also subject to interpretation; it is usually impossible to include all possibly relevant groups of stakeholders in setting standards, so “open- and consensus-based” takes on a different meaning depending on which stakeholders were not part of that consensus. Apparently the additional oversight over a standard that comes by subjecting the auditors to an accreditation process does provide more reassurance about the overall governance of that standard.
To summarize, in evaluating whether an eco-label appears to be well-governed, the experts in our sample do not seem to just look at whether some specific requirement is present or not, but to look primarily to whether there is an additional layer of reassurance built into the system. In addition to becoming an increasing force throughout global supply chains, eco-labels are creating their own supply chains of assurance and reassurance.
 ISEAL (2013). Principles for credible and effective sustainability standards systems. ISEAL credibility principles. London: ISEAL Alliance.
 For more detail on this study, see “Governance of Eco-Labels: Expert Opinion and Media Coverage”, Pavel Castka and Charles J. Corbett, Journal of Business Ethics, 2014; DOI 10.1007/s10551-014-2474-3