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UNCORRECTED TRANSCRIPT OF ORAL EVIDENCE To be published as HC 83-i House of COMMONS MINUTES OF EVIDENCE TAKEN BEFORE ENVIRONMENTAL AUDIT COMMITTEE (ENVIRONMENTAL AUDIT SUB-COMMITTEE ON ENVIRONMENTAL INFORMATION)
ENVIRONMENTAL INFORMATION: ENVIRONMENTAL LABELLING
Wednesday 14 November 2007 MR PETER KENDALL and MR ROBIN TAPPER MR TOM DELAY and MR EUAN MURRAY Evidence heard in Public Questions 1 - 94
USE OF THE TRANSCRIPT
Oral Evidence Taken before the Environmental Audit Committee (Environmental Audit Sub-Committee on Environmental Information) on Wednesday 14 November 2007 Members present Colin Challen, in the Chair Martin Horwood Jo Swinson ________________ Memorandum submitted by NFU
Examination of Witnesses Witnesses: Mr Peter Kendall, President, and Mr Robin Tapper, Senior Food Chain Adviser, National Farmers' Union of England and Wales, gave evidence. Q1 Chairman: Can I welcome you to this Environmental Audit Committee (Sub-Committee) looking at environmental labelling. This is actually our first oral evidence session, so it is good to see you here. Could I just say in starting that there is a lot of momentum behind environmental labelling and in fact we have all just been given one of these from DEFRA, the pocket guide for environmental labels, and so on. So there is a lot of momentum and perhaps a fair bit of demand for this sort of thing, but the NFU, I understand, really would not agree with environmental labelling in its current ad hoc and unscientific form. Are you actually discouraging your members from getting involved at the moment in the main, or is it very pick and mix, if you like, about what you do support and what you do not? Mr Kendall: Can I just set the scene a bit, if I could, first and say that as an organisation I think we have tried to be very pro-active in not just accepting but promoting our environmental responsibilities as farmers. The notion that we could produce at all costs and the environment picked up the consequences is one that we have shrugged off some time ago, but I think we have been much more proactive in driving those messages across to farmers. We have been involved in voluntary initiatives where we have insisted on farmers having on-going training, specialist testing of machinery. We have been very proactive, I think, almost to the extent that I have lost some members because we have been so determined to drive higher environmental standards. We have been very supportive of the agri-environment schemes as well, although at the time it has cost us in having the redistribution of money from Europe to fund some of these environmental programmes. So we think it is a fundamental and core part of what we do as farmers, protecting and enhancing the environment at the same time, and I think this is one of the challenges we will face increasingly going forward, while we produce more food, maintaining the environment at the same time. The challenge we have, and I think one of the very important aspects of farming in the United Kingdom, is that we will not be the lowest cost producer of a commodity. We do need to differentiate our product and we do need to set very real standards for our environmental credentials - unless specifically you want to talk about carbon, but I think it is important to set the scene of where we are so far. We believe that the Red Tractor Scheme, which involves farmers having inspections yearly, does mean that the way it is folded into the Union Jack at the moment UK production does meet the UK cross-compliant standards, it does mean that we have environmental impact assessments, it does mean that we have to belong to the voluntary initiative for using sprays and pesticides. So we are embarking upon a journey which is about differentiating our product and showing, although some would argue they are fairly basic factors, that we do have basic environmental welfare, but I would argue very high traceability credentials. So we have got behind very seriously labelling - and it has been a major driver for us as an organisation - but it has been in the broader sense to differentiate the traceability of the welfare and environmental standards that we currently produce to. One of the reasons why this is so important at the moment is that we have faced a major reform of the CAP, we have seen decoupling where support is no longer tied to what you produce. So farmers do need now to maintain or to achieve a market price for their products which keeps their businesses sustainable so that they can invest in that environmental protection and storage requirements to make sure that we have a negative footprint. Therefore, we have to find a way of making sure that consumers can clearly identify what we are producing and the fact that it is different to something which might be produced to very different standards somewhere else in the world. I will give you one really vivid example. We banned in 1996 stalls and tethers in the pig sector. We have seen the pig sector decline by about 46 per cent, yet today of the imports we now have to make up the shortfall of our pig production 70 per cent of it would be illegal under UK standards. So I need to make sure consumers can see that we are producing to different standards, so labelling is absolutely fundamental if I am going to achieve sensible prices to make sure that we are sustainable going forward. Q2 Chairman: Where does the main demand for labelling of this sort come from? Do you feel it is coming from the consumers, or from retailers, or from the industry itself? Mr Tapper: I think in the case of the Red Tractor, which Peter alludes to, it probably came from a combination of the industry and the consumer because it came at a time when we had a lot of scares in terms of product safety during the nineties and we had to find a way of first of all bringing together all the various standards which existed into one common one and then to make the consumers aware of that so that they could be assured that first and foremost the product they were buying (in this case with the Red Tractor on) met at least the fundamental safety requirements, and then the requirements that we would expect of basically good farming practice. So I think in that case it was both. I think here, in the case of environmental labelling, it is probably a combined issue. I believe actually the consumer is less engaged at the moment. I think certainly the awareness of the environment and climate change is increasing rapidly and probably since the Stern Report we have seen a massive awareness, but I still think the customer as far as labelling goes is still not quite there. Some are, and I suppose, to answer your question directly, some customers are demanding it and I think we have to provide it so that those customers increase over time as the awareness and the need increases. Q3 Chairman: Do your members have much control over the way these schemes are introduced and developed? Mr Kendall: No. One of the key things we were involved with following the Don Curry sustainable food and farming strategy was to move this from being a farmer-backed system to being one that is industry-wide so that it has a retailer representative process, a retailer, and environmental representation on the standard-setting groups. So we have deliberately - and it is not always popular with the farming community - made this more encompassing of the whole food chain. Q4 Chairman: In terms of how your members will be stretched in terms of their practices, and so on, are we actually seeing these challenges really quite tough ones or simply putting existing standards into a label, as it were, and not really stretching them very much? Mr Kendall: It is a challenge for me in my role as representing farmers on how often I get trounced when I go and tell somebody it will add a lot of cost to their business, but it has been and one of the criticisms we have had from farmers is that it continues to be a ratcheting up of standards. I think a very large percentage of farmers are implementing the regulations and rules as they are applied. We do have, as I say, quite a lot of criticism for ongoing ratcheting up, but this is about trying to make sure that we do meet standards, that they are verified and inspected and there is real traceability through the food chain. I would not want to put a figure on it, but the late adopters do find significant challenges in the scheme, so it is actually, I think, driving forward advancement. Q5 Chairman: How great have been the benefits in terms of promoting things as premium products, if you like? Have there been some real advantages there for your members? Mr Kendall: No, it has not been significant and it is one that we want to put more resource into going forward. We have a major reform of the Levy Board system and we want to find a way of actually being more proactive in bragging about the provenance, the traceability, the standards which we produce to. Mr Tapper: I think what it has meant is that although we have not seen value added to the farmers' work, as it were, the product, because most of the major supermarkets have adopted it we have seen it almost as the entry ticket in terms of supply. So from that point of view, frankly, a member who is not Farm Assured would have very little chance of getting his products sold into the major supermarkets. Q6 Chairman: What has been your members' experience of using other labelling schemes, for example offered by the Soil Association? Are they in competition with things you do, or is it something which is broadly welcomed? Mr Tapper: I think broadly speaking the Red Tractor forms the sort of baseline for everything and that certainly was our intention. In fact, we welcome schemes which add, if you like, value to the Red Tractor. So if you have got Freedom Foods, for instance, as an increased animal welfare add-on but it has as its base level the Red Tractor, then fine. Similarly with LEAF, which has its fundamental requirements the same as Red Tractor but puts greater emphasis on environmental responsibilities, then again we are very, very happy with that and in fact encourage it. Q7 Jo Swinson: You mention in your memo that there are some problem schemes that you are not happy about, which are not well thought through or are actually contradictory to other schemes. Which are the ones you had in mind when you wrote that? Mr Tapper: Not so much schemes as initiatives, I think. Obviously, the other big debate going on at the moment is the health debate and there is a lot of issues which come up on the environmental side which go totally counter to what is happening on health. So there are people saying we should have less animals on the farm, or that people should be eating less meat, and in doing so, of course, we could run in to protein deficiencies, on the milk we would certainly run into possibly calcium deficiencies. So we have got issues such as those. There is, of course, also the very real one of landscape and food production. If you have not got animals, then who manages the landscape? In the final analysis in some areas the animals are the grass cutters. Also, some of those areas do not support any other form of food production but that, so it would actually put our food supply at risk. There are lots of those sorts of issues. I actually think - and this is somewhat cynical, I would be the first to admit - the sort of scheme which has come up, the carbon labelling scheme which has come out of the work between PepsiCo and the Carbon Trust, if you were a little bit cynical and you were a potato crisp supplier and you knew you were not going to be winning on the health debate, where would you go? You might perhaps go to the environment debate because you maybe have to prove your credentials, that you have taken a responsible attitude. I think it is those sorts of things. Although it would be naïve to assume that competitive advantage does not come into it, to be purely focused on the competitive advantage I do not think is in any way helpful and I think ultimately very confusing for the customer. Q8 Jo Swinson: Are there any schemes which are up and running now which actually are accredited schemes where you have problems with the way they are running, or is it just those initiatives you have mentioned? Mr Tapper: It is those initiatives, and what does it mean for the customer? I think that is the question we have got to ask at the end of the day. I am no food scientist, but if I see a bag of crisps which weighs 25, 30 grams and I see 75 grams of carbon, I think, "That's quite a lot of carbon for a small bag of crisps," or if I see a bottle of wine which says, "Zero environmental carbon impact." What does that really mean? I do not have a clue as a consumer. Q9 Jo Swinson: A fair point. In terms of schemes which have been developed environmentally - you have talked, obviously, of some of the food labelling terms like the Red Tractor - is there anything which you think has been developed on the environmental side which has been successful which you would support so far? Mr Tapper: I think in their way things like the LEAF scheme have improved the awareness. Awareness is fine, but action, I think, is what we need and no other scheme, as far as we are aware, with the possible exception of the Soil Association organic scheme, does have rigorous standards which are regularly reviewed and I think that is what we need as a starting point. Q10 Jo Swinson: Labelling is obviously one way of presenting information to the consumer, but as you say there are obviously some issues with that in terms of confusion. What other options are there other than labelling for achieving that information interaction between the consumer and the farming community to come a bit closer together rather than having this great divide? Mr Tapper: This is a massively complex subject. I was very much involved with some of the work we did as an industry body with the FSA when we were talking about how we did food labelling and that has become a minefield where we have a lot of facts on which to base our decision-making and the way we go forward. Here we are at the very, very beginning and we just do not have that information. So I think that is the key element really. Q11 Jo Swinson: Do you think there is a potential for labelling to actually change attitudes of consumers? Mr Tapper: I think there is, but because it is so complex I think we should be a little bit more creative in this. Just to be able to say, if we take the Carbon Trust one, for instance, 75 grams of carbon, what does that mean? You want to be able to explain more than just what a snapshot with a label can give and certainly I think the Internet, the Web, plays a massive role in this and the point would be that you would have a front-of-pack Web address. That is how you would get it over in terms of making customers aware. Secondly, I think labelling, in-store signage, can also make a big difference, but just to put a label on I think is not necessarily the answer. It depends really on what measurement we get. If we get a sensible measurement which comes out with clear measures, then perhaps, but certainly I think the jury is out at the moment. Q12 Jo Swinson: Obviously it is a very complex issue, but in a sense with the best will in the world putting a URL on the front of the pack and hoping people are actually going to go and log onto that website when they do their shopping, maybe get their little Blackberry out and have a look - I can imagine actually that might make shopping much more exciting for men, but that is probably not going to happen. So while it may not be perfect, do you not accept that having some kind of labelling system perhaps backed up by these other things which makes it simple for the consumer at a glance, once they are familiar with it, like the red, amber, green traffic lights food scheme, does have a great benefit in terms of consumer information? Mr Kendall: Where I think there are concerns is with what sort of products you would label. Agriculture is peculiar in as much as it happens in the outside world, it happens in the unprotected environment very largely. We are not taking 50 tonnes of steel into a factory and producing nuts and bolts coming out at the end, where you can measure your energy in and you can measure each unit and the amount of energy you have consumed. With that packet of crisps which Robin alluded to the potatoes could have come from Herefordshire, from Norfolk or from Scotland and the conditions in growing those could vary enormously and the impacts of how much cultivation was done on those plants will vary enormously. We are not producing, as I said, in a sanitised environment of a factory. So it is going to be a real challenge and we need to find out if we are going to have a move towards putting some sort of carbon labelling on a common standard with some sensible methodology. The early methodology the Carbon Trust talked about did not take any account of positive impacts which a farm might have. So if you had a dairy farm which used its animal manures to actually produce anaerobic digestion producing renewable energy, you would have your negative carbon balance but you would have no credit for the fact that you might have been taking green waste. There is a very good example in the part of Bedfordshire where I farm. Bedfordia Farms have 900 pigs and they take all that slurry to big silos and they mix with it the green waste out of Milton Keynes and Bedford. The methane is then burnt to produce renewable electricity. They end up with a very high value digestate to put on the ground as fertiliser. They are getting rid of the problems with the slurry next to the water courses and they are getting rid of green waste. In the system which was proposed originally there would be no credit for all the carbon benefit of actually making those sorts of amends. Farming is a very difficult area to address and what we would be very concerned about is lots of different schemes giving confused messages rather than a very clear steer of what is actually going on. Q13 Martin Horwood: I would like you to turn to the kind of area I was going to ask you about. You have argued quite strongly for a single scheme. Are you saying that this would work across all food and drink on a universal basis? Mr Tapper: Yes, because I think if we come back to one of the original questions, who do we think is really wanting this, if we believe, as we do, that it has to come from the consumer first and foremost or we have to inform the consumers so that they can make sensible choices, then we must be able to have a system which enables them to compare product with product, otherwise there is really no point in doing it. Q14 Martin Horwood: When you say "compare product with product" do you mean within a particular class or market, or do you mean across the whole range? For instance, if you had a range of oranges which were probably all either imported or produced energy-intensively, if they had a traffic light system would you want those all to be red, or would you want oranges as a market to be defined so that the best ones got a green light and the worst ones got a red light? Mr Tapper: I think we have got to come back to a standard system of measurement. I am sorry to keep referring to the nutritional side, but that is really the only one we have got. As I say, I am no food scientist so do not over-question me on this, but within food labelling in terms of nutrition labelling and ingredients labelling there is a sort of system called Macanus & Witherson, which basically works out the calorific value of products and all the rest of it. So if you are producing a product you can look up Macanus & Witherson and you know what the various key elements of that product will be if you know what the ingredients are. What I think we should have is the equivalent to the Macanus & Witherson for environmental labelling, so we know what all the ingredients in terms of the whole environmental package is and we give each of those a carbon value (if carbon is what we are measuring) and that should be standard across all products and probably should be based on the lowest common denominator, so therefore the worst performance. If you can then say, "I'd do a far better job," or if you take Peter's example where somebody is using their waste to make a significant difference in terms of ameliorating some of the problems they might have created further back in the chain, you can then flag that up. So again, using the food analogy, if you have a standard product in order to be able to call it reduced fat, for instance, it has to be 30 per cent less than the standard. So if you can demonstrate that the action you have taken makes your impact 30 per cent better than the environmental standard then that could be a way forward. That is the sort of degree. It is very, very complicated. Q15 Martin Horwood: The complexity that would be hidden behind it is one thing, but in terms of the actual labelling and what the consumer would see, I am still struggling with whether or not you are saying you want exactly the same standard to apply regardless of the product. Mr Tapper: Yes, we are. Mr Kendall: Absolutely. Q16 Martin Horwood: I am flying blind here really because I do not know, but if turnips were a particularly energy-efficient crop to produce, would you not end up with the situation where all turnips were labelled the same because they were all relatively efficient compared with soft drinks, or something like that? Mr Tapper: Yes. Q17 Martin Horwood: So what incentive would there be for a turnip producer to improve? Would it not be more sensible to have a kind of best-in-class labelling, or not? Mr Tapper: But if you took my reduced fat one - Mr Kendall: The best crisp! Mr Tapper: -- if someone then said, "Right, well, I am not using the same amount of inputs, and I am significantly not using them, so I'm using 30 per cent less inputs for my turnips than the chap next door," then he could actually put that up as being a low environmental impact, low carbon. Q18 Martin Horwood: Just to pick up Jo's point and your point about nutrition labelling, we know there is quite a few very standard schemes now which are beginning to emerge as front-runners, including the traffic lights scheme. Would you like to see a traffic lights scheme for environmental labelling? Would that be better? Because I share your problems with 75 grams and what does that mean. Would you prefer a yellow, green - Mr Tapper: I think we would have the same view. From an organisational point of view, our view was for the nutrition labelling that we should go down the GDA route to give consumers the opportunity to decide for themselves, to choose what impact they are having. Q19 Martin Horwood: But is that not exactly the same problem you have been alluding to, that it is actually quite complicated to work out from the numbers whether it is good or bad? Does not the traffic lights system actually give a much clearer message? There may be complexity hidden behind it, but in terms of the consumer making an immediate judgment as to what is good and what is bad, traffic lights are surely much simpler, are they not? Mr Kendall: But it does not tell the story. For instance, if you have butter it is virtually all red, so it is a red spot. If you have low fat butter or a low fat spread, which has probably got only a third or two-thirds of the fat which real butter has, that is still a red spot. Now, you may say or one might take the view that in terms of trying to improve my diet or to reduce my fat intake the first stage in doing that is that I will go down the low fat route. By just sticking a red spot on it does not help you in making that decision one bit. Q20 Martin Horwood: Maybe that again argues for a best-in-class approach. Another thing is that some of the people who have submitted evidence to us have argued that universal labelling standards do not actually necessarily work in marketing terms and that actually the most successful labels we have got evidence of at the moment, like the Fairtrade mark and organic labelling, and in fact your own Red Tractor, have actually emerged from independent initiatives and the market has in a sense decided which ones are successful. Is that not a fair criticism against a universal scheme? Mr Kendall: We are talking about an area where we are looking at carbon and the environment. It is very important that we do not have people making up their own rules. That is why we opened the Red Tractor Scheme, from making an initial initiative for the farming industry to one which was a whole chain. It was really important that this had buy-in. I will give you one example where I think there is a real nervousness about the whole concept of environmental labelling, and I deliberately gave you my preamble about why I think it is so important that farming does differentiate itself and make sure it keeps its environmental considerations at the forefront of what it does. How would you label a low energy light bulb, for example, because actually when it is manufactured it might be more intensive and it might have a high carbon value because it takes more to manufacture and is more expensive than a cheap light bulb? It is on its consumption that actually it delivers its benefits. There are similar stories about disposable nappies, that you might actually put a lower label of carbon on a disposable nappy than on one which is washable and re-useable. Boots have done some work on shampoos. They say that actually of all the total life cycle only seven per cent of its carbon is in the manufacturing and bottling and delivering to store and 93 per cent is actually heating the water and using the product itself. I think we are in a very difficult area. We think that because it is such a difficult concept to grab hold of we do need some really quite uniform rules. Q21 Martin Horwood: You do not worry that uniform rules might be quite clumsy and might actually lead to some of the very problems you are describing? Mr Kendall: Certainly in agriculture I do have concerns that we could end up with some generic views which send some perverse messages because, as I have said, we are not steel going into a factory and nuts and bolts coming out the other side. We do need to have some sorts of sensible rules and not individuals trying to get a competitive advantage by having a proliferation of different interpretations. Q22 Martin Horwood: Can I just turn to another issue? Obviously what we are talking about a lot is carbon labelling and even possibly having a carbon price on products, but some of the evidence we have received suggests that that is actually a too simplistic approach and that there is a broader environmental sustainability impact, for instance nitrates and fertilizers and things like these. Would you support incorporating all those wider environmental impacts into the labelling scheme as well? Mr Kendall: Again, we are actually doing some work at the moment as an organisation with the Agricultural industries Confederation and the CLA to actually try and understand what these impacts are. Some people will say to you in a very generic way that all nitrate fertilizers are bad and all the current production and fertilizer manufacture is being done at a flamed gas in the Middle East and it is being turned into urea. Now, urea is much more volatile and gives off a lot more nitrous oxide. A more expensive version which I will be using on my farm is ammonium nitrate, which is much more stable. We actually at the moment do not understand the science behind saying, "Fertilizer is bad," and which fertilizer - Q23 Martin Horwood: Is that a yes or a no then? Would you prefer to stick to something simple like carbon - Mr Kendall: I think we can go to methane and nitrate oxide until we understand the science behind it. At the moment you could have more nitrous oxide damage from the bad handling of organic manures than you could have through using the correct inorganic fertilizers applied. That is the problem. If you say the organic system is preferable because it is not using bought fertilizer, actually you can get just as much damage from flatulisation and methane and nitrous oxide from using manures. It is a very complicated area. The science, I do not believe, is there to allow us to make those judgments yet. Mr Tapper: Conversely, because more work has been done on carbon and because we all acknowledge this great complexity, perhaps we start on the stuff that we do know about, or know more about, which is the carbon. So certainly as the first step I think carbon labelling is what we would support. Q24 Martin Horwood: Okay. You have clearly got a very deep knowledge of these issues. Do you think it has had much impact upon your members, this whole debate? Are they concerned about their carbon footprints? Mr Kendall: I think in the way the media has picked up the over-simplistic term of "food miles" it has some resonance, but I am not sure it goes very deep or that enough people even in the media understand that we can over-simplify food miles. I am a farmer in my role as President of the NFU and I do have some very sensible advisers who steer me in the right direction. When Hilary Benn was Development Secretary he went on the record to criticise UK rose growers on Valentine's Day last year and said that actually you would be doing more benefit if you bought them from Nigeria, or Kenya I think it was at the time. My members wanted to go off on one and say how outrageous it was that a minister could be promoting an imported product. Q25 Martin Horwood: He was quite right, though, was he not? Mr Kendall: He was absolutely right. On Farming Today this morning they were talking about large greenhouses being built down near Thanet where they are using all renewable energy and they can actually demonstrate a better carbon footprint by using waste energy sources and recycling CO2 into the plants. So my challenge to my members was not to chastise Kenyan imports but to actually tell them that if they are going to produce roses in February to do them in an environmentally-friendly and smart way. Q26 Martin Horwood: So would it be unfair to characterise this whole question by the fact that your members are concerned about environmental impacts when the market tells them to be concerned about it, but not in their own right? Mr Kendall: As I said, I think we are honest enough that we have to throw the challenge to them not to be protectionist but to make sure we demonstrate true wins. Q27 Martin Horwood: Are you saying that they will only really respond to these challenges when labelling or consumer power in some form actually forces them to change and take account? Mr Kendall: Other than the fact that carbon usually costs money, and I am a farmer and that is why I am actually looking at the moment and have a system on a tractor that steers itself because it saves ten per cent diesel. So when you go down a field and you turn around it comes back exactly parallel on itself within about two centimetres and in a reasonably large field that saves you a lot of energy and you do not end up with odd triangles. Now, the incentive for me to do that - okay, the investment is about £8,000 - is that over a three year cycle that will save me that money and actually make the job more efficient and better. I think carbon does equate to cost to farmers. It is only just starting to bite and I think when you have seen the inflation in the cost of energy it is making farmers more acutely aware of it. Q28 Martin Horwood: So do you think that if we really did get effective environmental or carbon labelling that would have a huge impact because that would translate into market pressure very clearly for your members? Mr Kendall: One of my biggest concerns about standards - and I go back to my very early comment that about 70 per cent of the pork we import is illegal under UK standards - is that we will all subject ourselves to competition and raise the bars and standards for ourselves for domestic production that is not applied on imports. Under WTO rules at the moment there are initiatives which allow the banning of imports of endangered species of animals. There are no such rules in the WTO for environmental welfare standards. Q29 Martin Horwood: So would you like the labels on the supermarket shelves, not on the products, so that they can apply to everything? Mr Kendall: No. If we are going to find a constant set of rules when we know the science and understand it, I think there is a potential for that, but we must wait and make sure that we have a single system which does not allow that competition and people misleading our consumers with a different and multiple amount of messages. Q30 Martin Horwood: Okay. Can I read you something from DEFRA in their memorandum to us? It says: "DEFRA is also considering the possibility of developing some form of generic standard for an integrated farm management and environmental management scheme, which would allow consumers to know more about the environmental provenance of food products and improve recognition in the market place." Do you think you would welcome that? Mr Kendall: Other than the fact that again they elude to some of what Robin touched on as well, the LEAF standards. Now, the LEAF mark is an enhanced environmental scheme which currently goes on a Waitrose product - not all Waitrose products, some Waitrose products, predominantly the fresh vegetables mainly. The challenge for that is that Waitrose charges about a 14 per cent premium. If the consumers were willing to pay that 14 per cent and have those higher environmental standards, Waitrose would be Tesco and Tesco would be Waitrose. What I am really nervous about is that we raise standards and costs on our productive industry which the market actually is not willing to pay for. As I have touched on before, we are not keeping out imports which do not necessarily meet those standards. So DEFRA can say to me that I need to raise my environmental standards and label it to those higher levels, but if it is not going to be - Q31 Martin Horwood: You do not think consumers would go for the higher level labels, they would go for the cheaper products which did not meet them? Mr Kendall: At the moment, as I say, Waitrose is a very small percentage of the market place and they charge quite a significant premium and it is not where the consumers are spending their money at this moment in time. It is growing rapidly. It is an exciting opportunity for us as farmers and growers to look towards achieving that goal, but I am very nervous that if DEFRA - and I have this discussion with them all the time - raise the bar too fast too quickly we export our industry. What is the point of us actually? Let us look at the pig sector again. We now have a surplus of grain. We ship it to Denmark, to Holland and to Poland to produce the pork to bring it back again, and produced in systems and standards which we do not allow in the UK. We have to think about how we raise the standards and it is one of my challenges with DEFRA. Q32 Martin Horwood: Would you have confidence in DEFRA to set those standards? Mr Kendall: They obviously want to go for enhanced environmental standards and I am nervous of that without the market actually driving it. Q33 Martin Horwood: You have made the point very elegantly that we must not set the bar too high in general terms, but what I am really asking is would you have confidence in DEFRA developing the right standard, or would you rather it was something done by the industry itself? Mr Tapper: I think we have said in our submission that we support DEFRA's approach in terms of labelling to come up with these universal measurement criteria, and we do. Just to answer one of your previous questions, I do not think also we should remotely see this environmental labelling as a marketing opportunity, and I think that is what it is being viewed as at the moment. People are coming from the point of view of, "Let's see this. We can sell one product more advantageously than another." I do not think that should come into it at all. We are trying here to inform consumers about the environmental impact which that product they buy has, and I think we have got to set that one up. So that is why we need the original - Q34 Martin Horwood: Can I come back to you on that? I find that a rather surprising statement actually. Maybe it is because I am from a marketing background that I do not think that is necessarily a bad thing, but surely if your members are confident of their environmental standards and their ability to respond and the fact that they might get better environmental labels than the competition that was being imported, surely they should see it as a marketing opportunity? Mr Tapper: Provided we are using the same criteria. Q35 Martin Horwood: Should you not be singing it from the rooftops? Mr Tapper: If we are using the same criteria, yes. Mr Kendall: Yes. Q36 Jo Swinson: I just wanted to clarify that you are open-minded to the idea of labelling which provides information but not necessarily to a generic standard which requires to be - Mr Tapper: No, sorry, I did not finish. What I was going to say is that we are very supportive of what DEFRA are trying to do in terms of creating a universal standard. That must also have first of all a really large scale consultation with industry and it also must have full scale testing with consumers. Again, I go back to the debacle we have got between traffic lights and GDAs. The reason why we have got the two systems is because there was not the full consultation, or in fact there was the consultation but it was not taken on board, so we ended up with the big food manufacturers saying, "We know better," basically, "We'll go our own route." So that is why we have a situation where we have got half the production side of the world using GDAs and most of the retailers using spots of various sorts. Q37 Jo Swinson: With the best will in the world, I suspect that actually we come back to the marketing reason for why we ended up with two different schemes, because various producers did not like the idea that their cereals, or whatever, actually were red and not very healthy after all. I think there is still just a slight confusion here about a standard or labelling because you have got some of the labels which give a standard like, "This is certified Fairtrade," "This is certified organic," but then there is also labelling which is more informational. Are you saying that you are supporting some kind of generic environmental standard across industry but that that would be requiring some carbon reduction, because I was understanding that you were more coming from the point of view that if we could create a universal scheme for measurement then the labelling would be what you would support rather than necessarily what DEFRA seems to be talking about here as almost a mandatory LEAF scheme or something? Mr Tapper: What I am saying is that we need first of all a standard set of rules which everybody adheres to and then if you wanted to use your marketing to develop those then fine, but it must be based on the same information. I think, as we discussed earlier, that must apply, so that the starting point is the same set of rules across each sector and then you have got to be able to demonstrate how yours is different, better, environmentally more friendly, or whatever. Q38 Jo Swinson: Just to probe slightly on how you might envisage such a scheme, because you have ruled out the idea of traffic lights and you also suggested, I think understandably, that the whole 75 grams of carbon is a little bit in the air and not really relevant to people. You mentioned possibly using the GDA as a measurement, but at least with the calorific intake there is a certain amount that you should have between this and that and you can at least do a percentage, but obviously with carbon and environmental labelling that is not the case. You are not saying we ought to have certain carbon emissions of X because less is pretty much always going to be better, so how would you actually envisage it working? Mr Tapper: If you go back to my Macanus & Witherson type experience, first of all that would provide the measurement and then you would be able to then work from that basis in the same way as you do in food. If you have a low fat version you can actually market the fact that it is a low fat version because it is 30 per cent less fat than the standard and the measurement criteria are there. So I do not see a big issue with that. The big issue is actually coming up with the measurement in the first place. Mr Kendall: I think we are concerned because this is a complex issue and we have seen the way there has been rationalisation in the abattoirs. I could be producing beef in Bedfordshire which then goes down to St Merrion in Wales to be slaughtered and produced and then goes on sale in Scotland. Where do we pick up the story? Where do we pick up the carbon measurement on the product as beef, for example? I think there are so many grey areas with different products going to different places and how it is produced, whether it is has been a wet season, whether I have irrigated or whether I have not irrigated. This is the point about whether I believe in British agriculture being responsible, getting ahead of the game, trying to use its inputs very responsibly. I do see it as a marketing edge for us in the long run. I just do not think we understand all the complexities of what we are doing on carbon usage and how we might demonstrate it at this moment in time. Chairman: I think we are going to get the answers to those questions later on this afternoon. Thank you both very much for your evidence to us. It is much appreciated. Memorandum submitted by Marks & Spencer Examination of Witness Witness: Mr Mike Barry, Head of Corporate Social Responsibility, Marks & Spencer, gave evidence. Q39 Chairman: Good afternoon, Mr Barry. Thank you very much for coming in. I wonder if we could start by asking you just to give us some details on Marks & Spencer's attitude to environmental labelling and the kind of information you give to your customers to help them understand the environmental impacts of their choices? Mr Barry: It will be a pleasure. I would like to start with the consumers, because ultimately whether we label or not is pretty much dependent upon their views. We have segmented British consumers into four specific groups. There are 20 to 25 per cent of British consumers who are not interested in environmental social issues at the moment, a lot of which is driven by poverty; they are too poor to care about climate change or saving people in Africa, they have just got to get through their own day. The next group is the largest group, they are about 40 per cent, and they are saying, "I am quite concerned about environmental and social issues, but I don't believe I can personally make a difference. If I give up flying, if I give up meat, if I give up ready meals and a billion people in China and India start consuming them, what is the point? I have just shot myself in the foot." What that group of people actually want to know is that if they do make a change it is a change which many people around them will make with them. They are part of a collective change mechanism. The third group, 25 per cent roughly, is saying, "We are concerned about environmental and social issues, very concerned, but we lead busy, complex lives. We will do things if you make it easy for us. If I walk into one of your stores and my only option to buy coffee and tea is Fairtrade, great, you know, I'll buy into it, I won't walk out, but when I've actively got to seek out the Fairtrade option amongst dozens and dozens of different product options in your store in ten busy minutes, probably not." Then there is the fourth group and the group which perhaps is represented in this room today, which is the ten per cent of green crusaders. That group has doubled in the last five years, which is very encouraging, but it is ten per cent, and they are the only significant group at this stage that want to use environmental and social labels on a day to day basis, we believe. So if we just take that a little bit further and if we actually sit down with focus groups and ask our consumers, "What do you want us to do? If you care so passionately about these issues, what do we do next?" consistently they say to us, "Okay, I personally as a consumer will take some responsibility. It's 25 per cent of the job I will do. 75 per cent of it is you, Marks & Spencer," or another big business, "You've got to take a lead on this. I've seen your message and I'm willing to buy into a greener way of doing things, but boy you'd better be the ones that take a lead on it and do the hard work for me." Just to complete the introduction with that, we believe that means that much of what we talk about today is actually about management standards for a big retail such as Marks & Spencer to manage its supply chains, 2,000 factories, 15,000 farmers, half a million in the developing world making products for us. A lot of what we currently call environmental and social labels are actually management tools by which we can drive and enforce change across our supply chains and then report to society on the progress we are making. We made a big commitment back in January for something called Plan A, 100 commitments, where we basically said all our wood products in the future will be FSC or recycled. You do not have to worry about it as you walk around the store, whether it is the wood on the décor, the marketing décor, the wooden furniture or even the wood in this suit, the cellulosic fibre here made from wood, it will be all FSC and recycled. Now, I will give you proof points, I will give you information about that, but very, very clearly I am not going to stick on ten different labels on every single product I sell. We have 35,000 different products in M&S, which is small for a retailer. Many retailers carry quarter of a million different lines. To put a label or multiple labels covering Fairtrade, pesticides, environmental issues, carbon, on every single one of those products would drive us to distraction, our suppliers to distraction and also the consumer. Now, that is not to dismiss all labels. Some labels, for example Fairtrade works fantastically well, and just let me capture why that is. Fairtrade works very, very well because it is based on four or five things. It is an independent standard that I cannot influence. It is an independent standard. The second thing is that it is a very complex set of issues behind this but actually it is just a world that you buy into as a consumer. Thirdly, it is all about grass roots movement. It is not just that label chucked out there, there are hundreds of thousands of people who feel passionately about Fairtrade around the UK, meeting in church halls, driving it forward, encouraging their friends to buy into it. The marketing is very good by the Fairtrade Foundation to generally raise awareness of everything. Finally, it is an issue which consumers can just about get their heads around: the poor people in the poorest parts of the world get a bit more of the price that I pay here in the UK for the product. So for those four or five reasons Fairtrade works very, very well as a standard. I am not sure that every label that we consider will tick those boxes. So that is just a brief introduction of our current position. Q40 Chairman: I am very pleased to hear about the suit because I have got one on here! Mr Barry: It will be FSC eventually. Q41 Chairman: It has got lots of labels in it, but none of them about the standards really. For those ten per cent of the customers who are keen and enthusiastic, what does Marks & Spencer do to help them find out what is behind the label? Do you have a website with product information on it and things of that sort, and how would you point people to it? Mr Barry: For those consumers, we are using labels. If one of our T-shirts if Fairtrade, it will say so. If one of our ready meals is organic, it will say so. Clearly for nutrition advice we use the Food Standards Agency scheme for red, green, amber, and we put that on our products. So for the informed the information is there. What I am saying today is that we should not assume that that is the right way to get to the other 90 per cent. For the ten per cent who care passionately and who want the information, I will give it to them. This is not about M&S saying you walk into a denuded store with no information about environmental and social issues, absolutely not, but what we are saying is that quite rapidly we are going to reach the end of the productive use of labels to actually change consumer behaviour. I think we can probably get to 20 per cent who are buying very passionately into information on labels. The other 80 per cent will just throw up their hands and say, "Too complex, guys. Ten minutes in your store. Please do it for me." Q42 Chairman: Obviously most of the merchandise you do sell is own brand. What advantages does that offer you as a retailer and are there any disadvantages? Mr Barry: I think there are advantages for our customers. We give a very simple message. Whether you are in a food hall in Truro or Aberdeen, every egg used in that food hall is free range. You do not have to think about it. Whether it is in the ready meals as an ingredient or a shell egg, it is free range. All coffee and tea is Fairtrade. No GM ingredients anywhere. That is a great benefit. Our customers like that. There are disadvantages. We do not gain from the advertising done by the big brands that talk about, "Buy Coca Cola today." It is there on television. We do not sell the Coke brand and we do not gain from people coming to our stores to buy that brand and the advertising that has driven it. Nor, to be fair, do we buy into or get access to all the science that some of these big food brands are doing. Some people like Unilever and Proctor & Gamble are doing some very, very good stuff at this moment in time. Because we do not sell their products, we do not necessarily have access to the science base. It means we have to rely on ourselves, our big technical teams in our own organisation and our suppliers as well. So there are pros and cons. Q43 Chairman: You mentioned GM. I am just wondering, when you did have that big drive to promote the fact that you were GM-free, as it were, what impact did that have on consumer behaviour? Did you find that people were flocking to your stores to buy, or was it maybe just something they did not understand? Mr Barry: It is a very interesting point. In January 2006 we ran a big campaign called Look Behind the Label, which talked about all the things that M&S were doing in terms of environmental and social issues - Fairtrade, free range, leading the way in salt and fat reduction. We talked about non-GM. On the back of that advertising campaign we saw the biggest ever upswing of trust in the Marks & Spencer brand, which is a reasonably well trusted brand already. But what customers were telling us was, "Great, M&S. I'm not going to automatically buy more of that one specific product in this campaign, but I will shop more with the brand because I trust that you're managing all these issues across everything that you sell." So in terms of brand and reputation it is hugely powerful. Do we want to trim it down to one product out of 35,000 and try and sell more because of that? No, we do not. Q44 Chairman: In your memorandum you state that you will prioritise support of a small number of well-established independent labels. How do you decide which ones to support? Mr Barry: I have given you the example of Fairtrade. There are four or five criteria which really tick the box for us and I think Fairtrade is almost unique in ticking all the boxes. I think organic does as well. We think certain things like the Forestry Stewardship Council and the Marine Stewardship Council as well do not have to be just about managing our supply chain and meeting a 100 per cent commitment to use FSC or MSC in our business but can start to be brought in front of the consumer. Beyond that, I am not sure there are many at the moment we would want to use and put in front of our customers. Those are quite clearly defined issues. They are something to do with timber, the Rainforest. We protect it, FSC. It is quite clear. The same with fish and MSC. You have been talking quite a bit about multiple impact labels, can you have a label which talks about pesticides, labour standards, fair trade and packaging all in one. We do not believe you can at this stage. We think the science they would require would be too complex. We believe that you aggregate to such a broad level that it is meaningless for the consumer and they may as well just buy into the M&S brand itself to shop with rather than this hugely complex aggregate label. So at the moment we will use Fairtrade, organic, MSC and FSC in our business, but not much more than that. Q45 Chairman: So your approach really is to say that M&S is the label and that anything which bears "M&S" means it is pesticide-free, it is organic, all of those things? That appears to be your approach. Mr Barry: That is our approach and we believe it is the logical end point for most people. Again, we have 35,000 products. Even if you felt really, really interested about every one of those 35,000 products with ten socially environmental issues associated with them, you would need 24 hours in our store looking at every label before you ever made a purchase and that is not good for you and it is certainly not good for me. So we want to give people simple choices and the vast majority of consumers, 70 - 80 per cent, are saying, "I just want to understand that your brand across 100 commitments is doing the right thing." Q46 Chairman: How do you test consumer opinion on this? Obviously you have done opinion surveying and so on. Is the consumer truly able to influence your policy decisions still? Mr Barry: Again, it is a very, very important point. What happens with consumers - and let us forget environmental and social for a minute and let us just talk about fashion or price, or the products we sell - is that we follow trends and we spot trends. We then interpret the trend and offer the result to the consumer. No consumer comes to us and says, "Mr Barry, in two years' time I want you to make sure that all your fish are MSC, the hoki from New Zealand, the cod from the North-East Atlantic." They just come along to us and say, "I've got this broad concern about fish. There's not enough in the sea. You just do something about it." We will then listen to a wide stakeholder group or opinion-forming pressure groups, government, et cetera, to say, "Okay, the consumers are concerned. They want us to do something. What's the best option?" We will look at four or five different options and we come up with the preferred one. We offer that to the customers. Occasionally, they turn around and say, "You've chosen the wrong one. We don't want that one," but usually they say, "Yeah, that's fine by us. You've interpreted a genuine concern that I had and you've given me a solution. That's what we want," and that is what we are doing here with the environmental and social issues. Eighty per cent of consumers are saying, "I'm concerned in some shape or form." Our job, if we are to succeed as a commercial entity in the future, is to interpret that to an extent better than our competitors and offer the solution quicker and more authoritatively to our customers. Q47 Chairman: You do a fair bit of choice editing and brand reassurance. These are obviously quick ways to resolve the problem, the removal of anything which is not AAA rated, white goods. I think John Lewis follow that policy. That is one example, but do not retailers who follow that kind of approach reduce people's choice? This is a free market, is it not? If somebody wants to make a bad choice, who are you as a retailer to say that they cannot make a bad choice? Mr Barry: Let us be clear, retailers reduce choice every single day of their lives. We put 35,000 products on our shelves every year. We reject another 50,000 that we could have done because it is the wrong price, the wrong fashion, it is never going to sell. We reduce choice every day of our lives. All we are doing here is saying, "For a new emerging set of issues, environmental and social, we will take some tough choices for our customers. We will do it not on a whim. When we've done it, 100 per cent free range eggs, 100 per cent Fairtrade coffee, tea, jams, and very significant investment in Fairtrade cotton, it is on issues that consumers broadly understand and have bought into, they have been around for many years, and the natural end point is to edit it out of our business, but we believe we have got to give that leadership. It is not about us sitting back and saying, "Madam, that's a bad choice, that's a good choice, your problem. If you want the bad choice, be it on your own conscience." If you have beliefs as a retailer you should be editing out the bad options. Q48 Chairman: If you put your hand on your heart, could you say that if you shop M&S you shop green? Mr Barry: No one can say that. I think Marks & Spencer, amongst several others, is trying as hard as anybody in the world. We have been ranked as the world's most sustainable retailer. We have scratched the surface a little bit deeper than anybody else. That is all it needs. There is so much more to do. Q49 Chairman: How much more, do you think? Mr Barry: Well, we have made 100 commitments to deliver over five years, which is 2012, and I am already starting to think about the next 100 commitments which will take us to 2017. It never ends. By then we will have delivered 100 per cent MSC certified fish, 100 per cent FSC certified wood. We have not committed at this stage to have 100 per cent organic or Fairtrade cotton. That might take 10, 20, 30 years to achieve. We have bought a third of the world's supply of Fairtrade cotton and that is only ten per cent of the cotton that Marks & Spencer uses. To actually drive sufficient demand for Marks & Spencer we are going to have to totally change the whole approach to cotton production around the world. That is not going to happen overnight, but what we have done is to set very public targets to say, "This is what we're seeking to achieve. If you don't think it's enough, challenge us, but we will report to you on a regular basis about the progress we are making across everything that we do." But we are not going to seek to try and shrink it down to a label on every single product we sell across all those 100 issues. Q50 Jo Swinson: You mentioned that a major issue for you in terms of the driver is actually driving trust in the brand, but do you have any evidence that because of labelling consumers do change their purchasing behaviour? For example, are you selling more T-shirts now that you have got a huge Fairtrade cotton sector? Mr Barry: We reported that when we shifted all our coffee and tea to Fairtrade we saw a six per cent uplift in sales, which might not seem much but to us it was huge in a declining market place. Coffee and tea is a very mature commoditised market place and to find a point of difference with that was very, very significant to us. I think we have been very clear from Stuart Rose down in the business that we do not want to get locked into a model which says we must prove for every single product line that one specific change resulted in 1.6 per cent extra sales. This is about an investment in the sustainability of the brand and its ability to operate in the future, and that is the way it will remain. So I am not sure that environmental labels, unless they are very, very good ones like the Fairtrade Foundation, will ever prove that a particular product will see an upswing in sales. I think it is very dangerous to go looking for it. You will spend years trying to find it. Q51 Jo Swinson: You basically set out that you think there is a small cohort of customers who might actually be swayed by environmental concerns over other things. Of the other 90 per cent, you say that you reckon you could get ten per cent of them making these decisions. Why would you say that that is not likely to go beyond those 20 per cent? That is your focus group research. Mr Barry: I think, to be very clear, 80 per cent of consumers are saying, "We want environmental and social issues to be managed as part of the decision-making in shopping." It is just that the majority are saying, "You manage them for me." Ten per cent are saying, "I'll manage the issues on my behalf provided you give me the information." I believe that will double. But just to keep up with all the science at the moment is very difficult. We are faced by conundrums every single day of our lives. Do we stop flying food in from Africa to correct the carbon or offer the jobs in Africa? We can start to reduce methane emissions from our farming base now, but probably at the price of worst animal welfare standards. What is the value of that? So I think to ask consumers to take on those very complex trade-offs directly would be wrong. They want me to do it for them. They want me to have spoken to many different voices, animal welfare groups, farming groups, government groups, and having listened to all those voices made a decision for them. The science of the future is only ever going to get more complex. When I started this job six, seven years ago most of the things I was dealing with were quite straightforward. You just use less energy. It saves us money. The future is about trade-off and complexity and I cannot expect the majority of consumers leading busy lives, having not done a PhD in Science, to be able to make informed choices. Q52 Jo Swinson: You did point out earlier that you are in an almost perhaps unique position, having control over the supply chain for most of the products that you sell. I do not know what the M&S share of the grocery market is. Mr Barry: Four per cent, and ten per cent on clothing. Q53 Jo Swinson: So 96 per cent of our grocery shopping is probably done in major supermarkets and a small proportion of that is probably in convenience stores, and so on, but if somebody is going to Tesco, Asda or Sainsbury they cannot have that same relationship they might have with the M&S brand to say, "Well, they sort it all out for me," because you are then coming up against major manufacturers, the Unilevers and everything else, so this sort of brand approach is not going to be one which will be able to work across the board for consumers. Do you, therefore, not think there is a value in some kind of perhaps simplistic carbon footprint labelling, if that could be developed? Mr Barry: I am going to hang my head a little bit in shame now, because I am going to tell you that some of my competitors are very good at this. Sainsbury have gone and done 100 per cent Fairtrade bananas. They only sell Sainsbury bananas, they do not sell Unilever bananas or anybody else's. So I am sat here on a neutral basis now, rather than speaking for Marks & Spencer. I believe that the big supermarkets are able to, and are doing in some cases, this choice editing where they can. I think when it comes to making sure there is a uniform proposition across the whole of their shelves, about 40 per cent of what a supermarket sells is own brand and 56 per cent is branded goods and I think for the 40 per cent of their own brand they would have the expectation that they could match M&S or would have the expectation that they could keep ahead of them. That is just competition. The other 60 per cent I think are working with some very good brands around the world to drive change. On some things like food health (so we are talking about red, green and amber) and on packaging I am very supportive of what they are doing because ultimately it impacts on you at your house. I have got to tell you that we are using now the WRAP symbols and all our food packaging by the end of this year will say, "This is how to dispose of it. You either recycle it, or if you cannot recycle it you must put it in the bin." There is nothing to stop any brand, whether it be a supermarket or the branded goods they are selling, putting those on. The same with health. It is very, very simple, red, green and amber. You either buy into it or you do not. When it comes to more complex issues, talking much more predominantly about the supply chain and how you manage timber sourcing in Indonesia or farming in Scotland, there will be challenges for other supermarkets as to how they answer that. I would humbly say you must speak to the other supermarkets as to how they might solve that one. All I can speak for is M&S and M&S is planning to take things forward. Q54 Jo Swinson: Do you plan to pursue any kind of carbon labelling? Mr Barry: We are very clear the Carbon Trust is the only big tent in the UK for developing the carbon label. If there is going to be a carbon label (and it is an "if") it has got to be universally accepted. We do not want to repeat the problems we have had with health labelling with two competing schemes. One scheme, led by the Carbon Trust, which Marks & Spencer and I think most of the retailers are working into. Some people are trialling labels at this moment in time. That is their option. You learn from doing that. We do not want to use the labelling with its current ties. We do not believe it is right for consumers. Having said that, we are working behind the scenes very, very well with the Carbon Trust to actually drive labelling forward. Having said that, it is probably several years before carbon labels will be extensively available, will be rigorous enough to actually put on products and actually meet green claim codes requirements for the ASA and actually result in consumer change in their purchasing patterns. Marks & Spencer today knows what its carbon footprint is. We can start driving it down today. We know entirely where those carbon emissions are coming from. Do I need to put a label on the product in five years' time to tell the consumers and ask them to make a change in their purchasing decision? Possibly, but I can get after a lot of those emissions myself in my supply chain. Q55 Jo Swinson: One of the things you have introduced is the air freight logo, which you did admit in your memorandum is a fairly crude measure, but have you actually found that that has changed consumer behaviour at all? Mr Barry: It has had no impact whatsoever on sales and that is exactly what we intended because we put that label very clearly on. This is the technology Marks & Spencer use to move its product. It is not a carbon label. It is basically saying, "This is a technology that we've used," and the reason we did it is very, very simple. Every time we put food or flowers on a plane, that becomes the dominant factor in its carbon footprint and every other aspect of the carbon footprint of a product we sell is variable by sight of operation. So, as Peter Kendall referred to, you can have the greenest greenhouse in the world with renewables running it or you can have the world's worst greenhouse consuming huge amounts of coal and oil to heat it. It is entirely site-specific. Until you have a site-specific carbon label, that is the only time you can address that. We already know now that as soon as we put products on a plane within reason virtually every single plane has broadly the same emissions and there is no green option out there, so let us be very honest and tell our consumers where we are using it. Let us reassure them that we are not actually flying much in, about three or four per cent of what we sell. It is very small. There was a scenario twelve months ago which said that consumers were beginning to suspect that everything that was not British was flown in, and actually we have reassured them that it is not. We have also said separately from that that we will reduce air freight but we will target two areas rather than the developing world. One is, we will go to the developing world and do R&D to try and shift things off planes onto boats, using the same existing supply chain. That is with poor countries. We will also target rich countries where we air freight from on the basis of do they really need our business, there is no upside to the carbon downside, and we will start to reduce those. We have made it very clear we are not going to reduce air freight for the foreseeable future from the developing world, but we will put a logo on to tell you where we do use it. Q56 Jo Swinson: I just have one more question about the concept of carbon labels. In your memorandum you said that consumer carbon labels are likely to be most effective when the consumer use phase dominates a product's overall carbon footprint, like the fridges and so on that we are familiar with. What leads you to make that claim? Mr Barry: Because it is something where you, as a consumer, see a label and you think, "I can do something about that." So when you are actually eating something and you have got red, green and amber on salt and fat calories, "Ah, I can actually do something about that. I can live my life in a healthy way if I just eat greens rather than reds." With a red on there saying that this is relatively low carbon meat compared with most meat, what do I do? It is a bit difficult to get your head around, whereas with a television I can actually use every day of my life, it is sat there in my front room, I am proud that it is the lower carbon of the options I could have bought. It is part of my lifestyle. I was already unplugging the television anyway so that it was not on standby. Now I know it is also green. It tells you when it is actually in use. I can get my head around it. So we just think consumers will always buy into labelling when it is more about their life, packaging of products where the impact is dominant in their home. Q57 Jo Swinson: Do you not think there is an argument that it is also useful for people to have that information of things that they might not have actually thought was, for example, particularly bad from a carbon point of view. To use the food example, there have obviously been foods where people thought they were eating incredibly healthily and then realised they were full of added sugar, or whatever else, and they needed to just have them as treats. That is surely part of the motivation behind carbon labelling and also for consumers to be able to make that decision at purchase, "Well, do I want to buy this product, or actually is that product line itself or that product category itself quite an unhelpful product?" and go for some other alternative? Mr Barry: It is a very good question. What we are actually talking about there is an education decision. Do we believe that labelling is the best way of informing people about the impacts of their everyday lifestyles? Sometimes it might be. What we are saying is that sometimes it might not be and you should not automatically assume that the label means, "I understand the issue and I'll do something about it." It might just leave me more confused, you know, "What does that mean?" This is why I am very supportive of what DEFRA are doing with their product road map at the moment. Basically it is ten product areas and we are looking at all the hot spots environmentally down the supply chain from production use and disposal, and that is starting to pick out areas where yes, we can use a label for education purposes, yes we can use the label for helping people to make informed decisions and change their purchasing practices, or the label is not valid there and we are going to have to find different tools to change. This is, I think, a great role for government to get stuck into. It is about looking at all these products and picking out where the labelling is actually a benefit. It is not everywhere and it will not in every instance be the right educational tool, but sometimes it will be. Q58 Martin Horwood: I will say first that I am a bit fan of M&S and I know everything you are doing on corporate responsibility and environmental issues is good, but if I was a cynic I would say that the approach you are describing is one which is going to be absolutely fantastic for you because you are going to have a system where there is not the more universal scheme, so M&S will still stand out. You will walk into M&S and people who are in the 35 per cent of the market you are really aiming at, who are influenced by these things, will think M&S is absolutely tremendous and there will be these star labels that you want to promote, which will be all over the place in M&S, but for the people who are walking into Tesco and Asda I do not see how this scheme will influence their behaviour much. Mr Barry: Again, I understand they might feel like competitors, unfortunately, but I actually think those guys are doing some very good, interesting stuff, and again I have used the example of bananas with Sainsbury. I think Waitrose is going to be out of battery eggs for all their own brand products. M&S just has a different looking model, that is all. I think the actual model that you use is just as applicable in other supermarkets. They might do it at a different pace from us, but I think what the guys are doing is just as interesting. Q59 Martin Horwood: But surely you do accept that if you have a universal system admittedly M&S would not stand out any more but everybody would be able to make those kinds of choices and we might expand the number of consumers who were making decisions on the basis of the environmental impact of the goods they were buying? Mr Barry: Yes, it is a legitimate challenge, but what I am saying here is - forget M&S, I am saying there is a vanishing point here in the debate which says that in any supermarket there are at least 35,000 products, in most supermarkets 70 - 80,000, and if every product had a label on it - and let us start with the situation where it had a label saying, "No child labour, no pesticides, no GM, the packaging can be recycled, MSC fish, FSC packaging" - six or seven different labels on 70,000 different products, no consumer, I do not care whether they are the richest in Waitrose or the poorest in the other supermarkets, will ever be able to actively shop on that basis. Q60 Martin Horwood: Surely that does support a universal scheme which does do what you are describing in terms of the white goods labels, which is to actually deliver a bit of simplicity at the front end, because the approach you are describing actually permits proliferation, does it not, of labels? Mr Barry: Sure. So let us take it on the level, 70,000 products. We are not going to have seven different labels on them, we will all just have one label on each one and it will be a sustainability label. It will say green, red or amber in terms of sustainability. As someone who lives and breathes this every day of my job, I cannot conceive of the IT system, the database, which will basically say, "I can score this red because I've done an audit of that factory and last week there was a kiddie in there so it's a red factory. All right, it's moved on this week, the kid's gone, so it's an amber factory." So many variables will be moving around constantly. With product development in supermarkets you are basically changing a quarter to a third of your products every year. You would have to be generating vast databases of information across multiple locations. So, as I say, M&S has got 15,000 farmers supplying it. I would guess the supermarkets probably have 40 - 50,000. You would basically have to have the information on the reforms of every single one of those locations to be able to come up with an aggregate label. What we do when we are buying fruit and vegetables around the year is we try and buy as much as possible in the British season. Britain is out of season. You might get your apples from Chile, then from France, then from New Zealand, every single one of which will have a different carbon footprint, a different issue to do with labour standards, a different issue to do with pesticides. Your whole system will have to shift. You will have to change all your labels on your apples to say, "It was an amber apple, not it is a green apple," and then back to an amber one. So I just think in practice it will be too complex to manage. Q61 Martin Horwood: That sounds very un-ambitious to me. Kraft is based in my constituency and I went to them to argue for them to adopt the Fairtrade standard with some of their really mainstream brands. They decided not to. They are going with the Rainforest Alliance label. In your world, how would you stop that kind of proliferation of different labels attaching to the same kind of standards, because surely that is a risk that is going to again confuse consumers and actually lessen their ability to make a rational choice? Mr Barry: I think the ultimate answer to this - and it is glib and you might not want to hear this - is that the market will decide. What you will see is that certain labels will be more trusted than others. No retailer can be in a position in five years' time, where we have got the exponential growth in labelling that we have now, of just slapping on label after label after label. There has got to be a point where we will all just say, "Stop! This is getting crazy. We must rationalise the kinds of labels that we're using." Q62 Martin Horwood: But will not some producers actually have an interest in promoting that confusion if their brands are less able to get the most popular label? Mr Barry: Of course. Q63 Martin Horwood: They will actually want to promote a bit of confusion to enable them to claim some of that market? Mr Barry: Yes, but again if you look at the level of scrutiny that we are under now as brands, the media interrogation of what we do, the NGO interrogation of what we do, it is a brave business that tries to build the long-term sustainability of its business model on that kind of approach. You might get away with it for 6, 12, 18 months, but in five years' time you will not be able to. You will be exposed as using a lesser standard. Again, I made the point a little bit earlier about this being predominantly about management standards. Ultimately, the only way you will be able to separate M&S, Tesco, Kraft, Nestlé, Proctor & Gamble, is not by walking into a store and judging, "I've been round and I've counted 16 Kraft products with greens and six with reds, and Unilever. I'm not quite sure." The only to do it will be with what we are seeing now, which is benchmarking, where each supermarket now gets ranked on issues by Greenpeace on fish sourcing, the RSPCA on animal welfare, to say, "We, Greenpeace, have looked through hundreds of pages of evidence from these brands. We then rank them Waitrose top, Sainsbury second and M&S third, and we've done it on your behalf." That is the only long-term option on this if we are not going to go mad, with the levels of data that we would be asking ourselves to manage, the suppliers to manage and the consumers to try and take it in. Q64 Martin Horwood: I do not quite see why having that complexity in the hands of NGOs and companies themselves is somehow possible and having the complexity in the hands of a universal scheme is not, but can I just ask, you have quoted organic as one environmental labelling scheme which has passed your test of the market adopting it and making it successful. What other environmental factors would you see taking off in the same way that you would like to see standards or labels attached to? Mr Barry: We have talked about organic, we have talked about Fairtrade, we have talked about fish and we have talked about wood. Those are probably the four very obvious areas where we have got some kind of success emerging. We are very supportive of LEAF as a system of managing our supply chains. I am not sure that we will ever put it on our products in front of our customers, but certainly as a management standard for actively managing and differentiating that supply chain we will use it. Carbon is the big question mark. Will carbon actually become a supply chain management issue that we will just manage on behalf of our consumers, or will we end up in the situation where consumers want a label on every product to make a decision? I think the jury is out. I certainly do not think in the short term it is a viable option. Maybe in five to ten years' time we will be actively using it and we will certainly work with the Carbon Trust to try our very best to make it happen, but again I think we are sat at the crossroads at the moment. Q65 Martin Horwood: Can I just come back to you on LEAF? Does that not exactly indicate the weakness of the slightly kind of free market approach to labelling? If you are not putting it in front of your consumers because you can tell your consumers that you are good at all these things, what pressure is there on Tesco or the others to promote it in their stores, because they would not meet the same standards as you do as a brand as a whole? But unless you are all putting it on all the products, surely consumers will not actually be given the choice in the end? Mr Barry: Again, it is a benchmark. I will be reporting, as Waitrose are reporting, 100 per cent of my fruit and vegetables meeting LEAF standards. Q66 Martin Horwood: Yes, but Tesco and Asda will not be doing that, will they, in practice, so how are consumers going to be encouraged to make those choices? Mr Barry: Again, the people doing the benchmarking will be saying, "We have compared the eight big supermarkets on how much they are using LEAF or an equivalent standard to manage their supply chains and we have ranked them accordingly. Q67 Martin Horwood: Okay. Do you think you have had enough or adequate support from the Government in terms of setting these standards and developing these systems? Mr Barry: I think the Government's role - and again I referred to great support for the product road mapping which is going on now. Maybe that should have happened five years ago, but certainly it is being a big support now in terms of picking out areas that really matter and picking out areas where we do need more information for consumers, and in particular where we might need labels. So I think that is very important. I would like to see the Government maybe develop a stakeholder group to sort of sit next to that product road mapping to advise it - it could be NGOs, it could be think tanks, it could be business advising them - and I think the Government could do an awful lot to intellectually shape the discussion in this area. I think we have to be very careful about assuming that we can go back to the twentieth century model when the Government will always bail us out, they will bring a law in to tell us what to do. Those of my supply chains, particularly non-foods, which are overseas the British Government has got a very limited ability to influence. We will apply - and I know the other supermarkets will apply - the same universal standards across the world. So going back to Peter Kendall's point that you cannot allow a system where British farmers have to meet this, but imports meet this, we reputationally cannot afford that. We have got to make sure that everybody, whether we have bought from the UK or bought from overseas, reach the same standard and I think that will drive it forward. So I think the Government's role is a lot about thinking. I do not assume that there have to be lots and lots of regulations first. Q68 Martin Horwood: In relation to your stakeholder advisory group, what would the priorities for that be? Mr Barry: For them it is to look at each product road map. Let us say milk, the first one to come out. Clothing comes out. These are environmental hot spots across the whole value chain to do with clothing or milk. "Do you, as a stakeholder group, agree? Fine, you do. What do you think the best option is then for taking the sustainability of the milk industry from here to here?" There will be lots of options, including R&D, the technical change in our supply chain that I was alluding to, and consumer information, labelling and awareness, having been informed by discussion and debate rather like we are having here and a probing, questioning approach, rather than automatically saying, "You've got to have a label." Q69 Martin Horwood: The final result of that would be, what, that they would give credits to those retailers who met those standards? Mr Barry: No, this is an advisory group for the Government. This is basically saying to Government, "You've come up with a model which says this is how the milk supply chain currently looks. These are the potential options for improving the sustainability. This is where we are now and this is where we want to get to. We, as a stakeholder group, farmers, retailers, pressure groups, Government really want to get to there. We buy in. These are the options for getting there. It involves different interventions by suppliers on how supermarkets manage the supply chain. It requires in some cases the use of labels and awareness and education for consumers. We, as a group, have tested what we think the best option is. We will now look for somebody to actually implement that." It might be Government regulation, it might be an industry standard that everybody develops together, but the stakeholder group is that about accreditation, it is about advice. Q70 Martin Horwood: But you would want the final result to be a label, would you, or to be a standard which some retailers would meet and others not? Mr Barry: No, the final end point for me is a more sustainable milk industry. On how you get there, there are different options, of which labelling might help drive some of it. This group is there to decide where labelling, amongst other options, is the right tool to use, no more than that. Chairman: Thank you very much for that very informative session. Memorandum submitted by Carbon Trust Examination of Witnesses Witnesses: Mr Tom Delay, Chief Executive, and Mr Euan Murray, General Manager, Carbon Footprinting, Carbon Trust, gave evidence. Q71 Chairman: Good afternoon. It is good to see you again. From what we have heard so far this afternoon it sounds like the Carbon Trust has bitten off more than it can chew! Nevertheless, you are biting and along with the BSI and DEFRA are producing a standard for measuring embodied carbon. Why is this necessary and what are your principal concerns in developing such a standard? Mr Delay: If I may, I will start off quickly and I suspect Euan will come in with the structure. I think there are two reasons really why we even started on this venture. The first was a reflection of where the low carbon sector is going generally and we concluded that, if anything, carbon offsetting has been a real lesson to us all that if we are not careful we get carried away with something which is going to potentially change behaviours, and indeed enable people to move to a low carbon future and indeed believe that they are moving in that direction where it is not necessarily the case. I think green was associated with carbon offsetting and the lack of an established standard, particularly in the voluntary carbon market, is a big lesson to all of us working in the low carbon sector. With glorious hindsight, I think we felt that had we been around as the Carbon Trust five years ago with the capacity to try to put a standard into the market, particularly a voluntary carbon offsetting standard, we would have done so. Looking forward, it seemed to us that over the next few years carbon labelling, and indeed a real focus on the supply chain emissions related to products and services, is likely to become something very much more significant and that in taking a very early step we would in a sense be in a position to influence the way the market and the standards within the market were being developed. So that was the first reason, I think, for us getting involved. The second is a piece of research which we did ourselves about three or four years ago - Euan was responsible for this - where we looked at the carbon emissions in all that we consume and we essentially looked at the UK's carbon footprint not in terms of the inputs to the economy but in terms of the outputs, what we all enjoy, so heating, food, recreation and leisure, commuting, and so on. That showed us a number of things, but the most obvious was that the split of indirect and direct emissions for embodied carbon versus in-use carbon was very polarised by sector. So there are some sectors like space heating where virtually all the carbon emissions are generated in the home as you consume gas typically in a boiler. Food is very different. There is a very substantial embodied carbon in the food products which we buy from the supermarket and a relatively small contribution to the overall carbon footprint of what we eat and drink at home in the in-use phase. It struck us at this point that there is a real imbalance and everybody has focused on the in-use and very few people were focused on the embodied. If you look at the total carbon footprint per person in the UK it is about 11 tonnes of CO2. Of that 11, three to four tonnes is attributable to energy in use, or in-use carbon emissions, which means that the remaining seven or so, well over two-thirds, is down to what we buy, what we enjoy in terms of amenity value, the buildings we go around in, the transport systems that we enjoy, and so on, and that embodied carbon is something that we need to get at if we are to build a low carbon economy. So I think that was the second reason why we decided we would look at embodied carbon in particular, that we felt it had very, very significant scope for carbon emission reductions by looking down the supply chains of a whole series of products and services. So that was the reason why. In terms of the structure that we followed, Euan can tell us about that. Mr Murray: I think following on from that, I guess from the two previous speakers you have had a pretty clear steer that standardisation is incredibly important, so within an organisation when they are making comparisons about different aspects of their business or supply chain operations being able to do that on a level playing field is very important, and then if the information is disclosed publicly it is important that any stakeholder using that can make meaningful comparisons between products or companies, or whatever it might be. I think on the second part of your question around challenges and concerns, the key here really is finding something which is the right mix of analytical rigour with practicality and we have to find that such that we can move forward, such that we know we can trust the results which are being produced in any product footprinting exercise, but also such that it can be done in a way that every company is able to adopt it and it is not the exclusive preserve of those few which have a larger balance sheet and maybe some more cash to spend some time thinking about it. There are four technical questions which leap out to me as being really the key ones we need to address, and we have heard this from lots of the different stakeholders that we and the BSI, and DEFRA, have been talking to. One is around boundaries, so when thinking about the impact a product has how far out or how far back do you go? We have heard a bit about the crisps example. It seems pretty clear that you ought to include the emissions from running the cooking machine in the factory, but should you be worrying about the engineer who runs that machine and his journey to work, or the energy he used when he washed the coat he is wearing in the factory? There is perhaps an argument that the boundary drops between those examples there. We have heard a bit about the use phase and whether it makes sense to include that in any measure of the impact of a product and I think there are definitely both pros and cons of including that and through the BSI consultation process we expect to have a pretty lively debate on that very issue. Thirdly, the treatment of agriculture is incredibly important, particularly in the food and grocery sector. Agriculture has a very important role to play in that delivery system and also makes a significant contribution to the overall carbon footprint. When I say "carbon footprint" there I do mean the greenhouse gas footprint, so the impact of methane and nitrous oxide from farming systems tend to be incredibly important. I would, of course, agree with Peter Kendall's statement that we understand CO2 much better than we understand methane emissions and nitrogen emissions, but given that they are such an important contributor to the overall footprint I do think we need to create the right incentives so that extra research and extra awareness is raised around those as issues. We risk making the wrong decisions in the short-term if we exclude them. The fourth area is around data sources and the level of prescription which is required to gather information that we can trust and gather information that we believe to be comparable. I think in some cases it is clearly very important to go out and gather real primary data specific to the particular situation. So, using the crisps example again, the energy and the emissions from the electricity used in the factory. I think where it is perhaps less appropriate is once we have worked out how many kilowatt hours are being used that we then go away and measure every single power station across the UK to come up with a grid emissions factor. That sort of information already exists in published information from Dukes, and so on, so there we ought to be relying on that, but the exact balance of that and the other three areas are going to be areas that we focus on through the BSI consultation process and I think those, and others, will really help all stakeholders involved in this to get their heads around what is really possible and what makes sense. Q72 Chairman: Given that the Government is looking at the possibility of personal carbon allowances which would focus primarily on our use of primary fuels, gas, electricity, petrol, diesel, why have we not really put more pressure on to have those things labelled? I can see companies coming forward and offering themselves, but it is a bit daft, is it not, when we can see the CO2 on our crisps but not on our fuel bills? Mr Delay: I think there is a number of proxies for CO2 on our fuel bills, and not direct necessarily, but there is a number of energy efficiency labels which do actually look at the in-use phase and essentially give a pretty clear steer in the form of white goods labelling in particular as to what the energy performance is like of different products. Extending that to have a more complete coverage of the in-use phase I think would make sense. Finding some way over time to reconcile the fact that there is an embodied carbon phase that is very significant in some sectors and an in-use phase that is also very much down more to the person individually, having made the purchase or having enjoyed the amenity, what they then choose to do with it. I think it is something which is going to have to happen over time and we are at the beginning of a very long journey, I suspect. Q73 Chairman: The fact is, if we do have personal carbon allowances and we also have the EU ETS and various other mechanisms which makes every individual and organisation responsible for its own carbon, would that not make all labelling redundant because you simply are responsible for your whole consumption, whether you are an economic unit or an individual purchasing stuff? You would not need any labels, would you? Mr Delay: It would, and it would provide an enormous stimulus to businesses to look down their supply chains and find lower carbon ways of making the products and services that we enjoy. That, at the end of the day, is where the embodied carbon story reaches its environmental impact, by persuading businesses and supply chains to reduce the carbon emissions in getting the product and service to you, the consumer. Labelling is just one way of providing that stimulus to business to do that. Indeed, the personal carbon trading system would do a very similar thing, but of course it would also include the in-use phase in a like way. I think the point, though, is that actually all the work we have done so far suggests that whilst we all recognise the very real and very immediate value and opportunity in being able to turn things off, switch down thermometers, add insulation, et cetera, to our domestic life, there are equally large opportunities in looking down supply chains and looking to reduce the embodied carbon in so many of the products and services we buy. If we really aspire to building a low carbon economy, we are going to have to tackle both halves of the equation. Q74 Martin Horwood: The labelling at the moment is only on a very small selection of products. Where are the drivers coming from for this? Are you trying to change consumer behaviour, are you aiming for fast moving consumer goods, or is it the companies in particular you are aiming at? What is the driver? Mr Delay: The story is a fairly straightforward one. We started doing academic research into supply chain carbon probably three years ago now and we started with a big academic research programme which looked at lifecycle analysis and how it applies to various industrial emissions. Then we started looking at the emissions from the UK and the carbon footprint of the UK on a consumption basis and some of the companies that we worked with in producing that and going forward into piloting a number of supply chain initiatives actually got to the point where they are saying to us, "Right, now we understand what the embodied carbon in a particular product is we would like to share that information. One, it is a driver internally to our organisation, to our employees, to our stakeholders and investors, to allow us to do more to reduce carbon emissions. We do not actually at the end of the day say, "This is where we are at and we are making a commitment to reduce." Then the case for the investment proposal which says, "This is how we are going to invest to reduce the embodied carbon" falls away. But equally we would like to raise that issue with consumers and allow them to understand what we are doing. It is part of the good front foot approach that we wish to take as a leading company in the sector. So it all started very much with businesses and with businesses looking up their own supply chains and opportunities, but then wanting to say, "Actually, having done the work, having understood what we now need to do, we want to share that more broadly," hence that notion of a consumer-facing label for businesses came up and it has been piloted with a very small number of businesses which were the original businesses we started doing the work with. Since then about 150-odd businesses have approached us for a second phase of the pilot work, as it were, and we are working with a small number of those companies, about ten or so, looking to firstly evaluate what the carbon footprint of their products and services actually is and then, as a second phase, considering whether or not they choose to communicate that through a label or otherwise. Q75 Martin Horwood: None of them saw a risk in people coming up and saying, "This instant smoothie's got 294 grams of carbon in it," or something like that, and misunderstanding the idea and then deciding to go for a can of Coke which had no label on it and so they thought it did not have any carbon in it at all, or something like that? Mr Delay: I think the risk was pretty well understood by all the companies which chose to be part of the pilot. They looked at the market research which they conducted themselves, they looked at the market research that we conducted and concluded that no, this was something that was the right thing for them as a company. It was down to them as a company to choose to do that. Q76 Martin Horwood: Did that market research show that consumers did understand the labelling? Did they understand that it was a measure of the environmental impact? It does not explain that on the label itself does it really? Mr Delay: The market research itself is quite interesting. We researched a number of different labels and a number of different messages that you can put across through a label. Those which had the greatest relevance to consumers was firstly the simple acknowledgement of CO2. The time between CO2 and climate change was much stronger than we had assumed. People understood it and understood the CO2 was carbon dioxide and then linked to climate change. There was almost no risk in putting CO2 on our labels. More contentious in a sense was then the commitment to reduce and the label we are at the moment piloting has a downward arrow, which indicates that the company concerned has made a commitment to reduce the embodied carbon in that product over a period of two years or they will lose the right to use the label. Now, I believe in pretty much every case of the pilot companies they looked at the research which said that over two-thirds of consumers want businesses to do more to address climate change and there is very much a debate around, "I will if you will." The businesses themselves wanted to show "We're prepared to do something and make that commitment to reduce carbon emissions in these products over time." So actually the companies were very keen to see the downward label as a second key message, which is a reduction commitment. The market research then went on to ask questions like, "Do you understand what embodied carbon actually is?" and it was very varied, and it continues to be very varied. The most recent bit of market research which I think is interesting came from Boots. They had research following a point of sale campaign where they actually showed the label alongside some of their products and got Advantage cardholders to actually fill in a small submission. One of the key questions there was, "Do you believe that the label should have a number on it?" because there was a big debate at the time when we first launched the pilot as to whether labels should just be a label or whether it should actually have a number on it and 72 per cent of the respondents said yes, they believe that a label should have a number on it. There is a number of interpretations there. One is that the number is relevant and they understand it, and I do not think all the other market research would support that particularly. Perhaps more relevant is that people said, "Yes, if you've got a number on it, it means you've really measured it. It's not an abstract notion, it's not guiding principles that you tick boxes on, it's actually something you've gone out and measured and we're going to give you credit for doing that measurement." That probably explains why the current pilot label has a number, a downward arrow and a clear indication of CO2. It does not mean that is the end of the story. Just like the actual methodology for measuring embodied carbon itself, which is very much up for grabs over the next year or so as part of the BSI process, whereby we hope to develop past 2050 as a publicly available standard, equally I think the way that information is then communicated again is very much up for grabs and we have a steering group looking at it. Q77 Martin Horwood: First of all, it would be really interesting to see that market research. Can you share that with the Committee? Mr Delay: I suspect there are some bits of it we can, yes. Q78 Martin Horwood: You can extricate anything that seems to be obviously commercially sensitive. Mr Delay: Can I just say that the companies themselves have been very generous in sharing information between themselves as well as with us, which is interesting. Q79 Chairman: I can see why in market research if somebody is asked whether they want more information or less they will generally choose more, but that does not necessarily mean they understand the implications of the number. What else are you doing to try and explain what the label means to consumers? Mr Murray: I think I would almost want to take a step back and ask the question, what do we mean by a label? Q80 Martin Horwood: That may be a bit deep for the amount of time we have got! Mr Murray: I think we give a little bit too much focus perhaps to the sticker which may go on a pack and actually when we talk to companies about labelling we almost talk more widely about consumer engagement and that is reflected in the three companies we first started piloting it with - Walkers, who are well-documented, having gone out with the label on the pack, but Boots did something very different where they have the benefit of owning the retail space as well. So they chose to use the label but actually as part of a much wider piece of customer communication where they put advertising boards up above the shelf but first of all displayed the label, the number, the commitment to reduce, but also started a conversation with the consumer to say, "We've already worked to reduce the footprint of this product. Here's what you as the consumer can do," and really use that as an opportunity to build around their "Trust Boots" message. Then Innocent drinks were the third case where they concluded that their website is actually the best place to use the label. Again, the logo with the commitment to reduce and the number, but they built an entire micro-site with much more information to educate the consumer about what it all means and then to educate the consumer about what they can then do. So I think that says to me that there are clearly much wider opportunities out there to influence consumer behaviour, to explain the story, and one sticker on the front of a pack does not an entire customer revolution make. Q81 Martin Horwood: Should you be targeting and prioritising retailers who control their whole environment? I do not know if you are talking to M&S or how discussions are going there, but are those the kinds of priority environments? Mr Delay: We have been working, as Mike said, behind the scenes of M&S and very much support the work they are doing and we have done a lot in terms of learning that methodology through some work we have been doing with M&S specifically. I think this is a five, ten year journey in terms of communication and awareness. I do not actually think the public's awareness of embodied carbon is as high as it will have to be. Consumers want to know more, but it is a case of where do they get the information. I think there are three levels of information. The first is, "Gosh, there's a carbon impact in almost everything that I buy or do," and overwhelmingly the responses that I have received have been, "I really didn't appreciate that every product, everything we do has a carbon impact." Message one. The second is, just a relative measure is very useful to understand the hot spots. So even in my own shopping basket just understanding that that is high carbon and that is not, that has a big impact, that has an more or less immaterial impact, is actually quite interesting and you do not need to get very many products before you start getting this sense of where the hot spots will be and that is probably, frankly, as far as most of us will go at the moment. It is probably some years away from the situation where indeed consumers will be able to compare within product categories different products on the basis of carbon either embodied or in use and make a conscious purchasing decision like for like across a different sector. Q82 Martin Horwood: Are there any sectors or businesses where you have encountered problems or where you think carbon labelling might not work? Mr Murray: Can I just elaborate on a point Tom made first? I think it might be worth casting minds back to perhaps 20 years ago and looking at calories and nutritional labelling in the same way. Today, does the average consumer understand what 75 grams means? Perhaps not. The fact that the number appears lends the work some credibility, but you do not know absolutely what 75 grams means. Equally, 20 years ago perhaps people did not understand what a couple of hundred calorie in this can of soft drink actually meant and it is only over the course of time when the information appears much more widely in conjunction with other awareness-raising campaigns does it really start to have traction, and indeed it has only been very recently with a front-of-pack nutritional labelling that we have seen wholesale changes in purchasing behaviour. So I think just because 75 grams is a new concept today does not mean that it is not something that we can build on. Q83 Martin Horwood: Can I come back to that, and can you come back to my other question, which was about whether any sectors or businesses have had a problem with this, or whether you think there may be some sectors that will not be appropriate for carbon labelling? Mr Murray: I have personally been surprised by the interest from right across industry. It is fair to say, I guess because they are sensitised to the nutritional debate, that the good and grocery sector has expressed most interest and we have been working incredibly closely with them and the trade associations for the last little while, but we have had interest from a raft of other sectors, specifically consumer goods more broadly, some electronics, construction products, hotels and hospitality, financial services, a really very broad mix. Q84 Martin Horwood: In the service sectors you could label? Mr Murray: Indeed. Q85 Martin Horwood: Could you label MPs potentially? We could put it on our annual reports! Mr Murray: As part of the pilot we are running now we are very likely to test projects within the financial services, the construction and the hospitality sector, because I personally believe that a lot of the underlying logic which you apply to a bag of crisps you can equally apply to a hotel stay or a bank account. Clearly, there are going to need to be some sector-specific rules and guidelines around where you get the data from, but I think the overarching concepts are very similar. Q86 Martin Horwood: From your earlier comments I think I may know the answer to this, but is there any evidence yet that this is actually making a difference to consumer behaviour amongst all the other factors like price and health labelling which are influencing their decision-making? Mr Delay: I think, to be honest, it is too early to tell. We are very early on in a pilot phase. We will be doing research in this area, and indeed the companies involved in the pilot will be sharing their research with us. There is absolutely nothing that is negative. All that we are hearing is positive, but I think it is just too early to tell. Mr Murray: I understand you are hearing from Walkers in a couple of weeks, but I can maybe steal their thunder! I think they themselves would admit that it would be difficult to say that they had seen an uplift in sales since they started using the carbon reduction label, but what they have seen is a real increase in recognition of the Walkers brand as being more sustainable. Perhaps equally importantly, or even more importantly, they have seen their staff and their suppliers really get behind it and now the impact the product has is at the forefront of their thinking when they do their jobs on a daily basis and they go to make changes. They tell a very interesting story about looking at the switch to biodegradable packaging, which they wanted to do for sustainability reasons. Q87 Martin Horwood: This raises an interesting like the one we discussed with M&S. Does this in a way become a way of rewarding star brands who make an investment in their own brand image and the brand values, or is it something you would like to become universal? What are your ambitions for it? Mr Delay: Certainly we would like to see it with a very broad applicability and therefore universal, probably international ultimately, because I think the businesses we are dealing with are typically multi-nationals but not exclusively. No, I think it needs to be very broad and not exclusive to the leading companies, but available to companies which are prepared to commit to making a reduction. That is the key point, because actually even if you started in a fairly poor place but you commit to making a reduction and you make that annual reduction year on year on year on year, a decade down the line your company will have changed out of all proportion in terms of environmental impact. The leading companies of today probably started on this journey ten years ago, so I think it is absolutely appropriate that you should allow them to explain what they are doing and what further commitment they are going to make, but equally you want it to be something which is available to the many SMEs in this country and overseas who are just starting on the process, and the reduction element is absolutely crucial because reduction over a number of years does take you from wherever your starting point was to a leading position. Q88 Martin Horwood: You are also working with Halifax, are you not? Mr Murray: Yes. Q89 Martin Horwood: Can you just expand a little bit on that? Mr Murray: It is another one of the pilot studies where we think it is important at this stage to test my hypothesis of whether you can apply the rules that we have used on crisps and shampoo and smoothies, take those and apply them to construction projects and Internet savings products and others. Q90 Martin Horwood: Do you have any evidence from them that somebody is going to make an investment decision or a financial product decision on something other than return and basic equity criteria? Mr Murray: They certainly seem to think it is possible. I would say again it is too early to say. We have only just kicked off the project. Q91 Jo Swinson: We have heard obviously about the complexity of the environmental issues out there, but your submission suggests that carbon is actually a good way to convey a lot of that information in one simple single measure. How can the carbon footprint really convey the complexity of environmental issues? Is there not a real danger that both negative impacts on other things, whether that is chemical use or water use if things get left out, or indeed as we heard earlier the positive impacts such as companies which are also generating their own electricity and doing things to reduce their environmental impact in other ways do not get accounted for in this measure either? Mr Delay: Yes. A carbon label will not be a catch-all environmental label, but there are many environmental attributes which are caught up by carbon as a good proxy. So waste is a petty good read into carbon. Low carbon and low waste tend to go together. It is not as clear with water. It is certainly not clear with things like toxic substances, but then again you would have regulation to deal with those without labelling ever getting involved. It also does not in any way address ethical issues of fair trade, and so on, so it will only ever be, I think, a subset of a broader consumer label and even probably a subset of a broader environmental label, but it is not a bad subset to start with, and of course the great benefit is that it engages consumers of today and the next generation with climate change, which is a very rapidly increasing concern for many. So in terms of saliency it absolutely ties into climate change, which is probably the one thing that people are going to absolutely buy in behind. Mr Murray: Can I just make a point of clarification on a point made by the NFU earlier, where they talked about the exclusion of some benefits which might be seen on the farm. I think the example was anaerobic digestion. The reality of the methodology as it currently stands is where the use of an anaerobic digestion unit on a farm displaces the use of some grid electricity or some natural gas burned by the farmer, that absolutely would get a credit. So it is not correct to say that that would be excluded. Q92 Jo Swinson: That is very helpful to know. You mentioned there were pros and cons about expanding it to include in-use phase as well as embodied carbon. What will affect your decisions on that? Are you going to be party to that? How is that being taken forward? Mr Delay: As a specific question, this one actually is being taken up by PAS, the SI DEFRA steering group, who are independent of us. I think that is appropriate and they are looking at this one in particular. It is difficult because the in-use phase is much more volatile and of course as a business you have very little control over what that in-use phase represents. Equally, to only tell half the story in some cases is confusing. It is not as clear as telling the whole story. In your ideal world you would actually be in a position to explain both the embodied carbon content and product or service and its in-use application and put the two bits of information together and hope the consumer can follow it. Boots did this pretty well with their point-of-sale information. They managed with point-of-sale the benefit of having scale to actually show, "This is what we've done. This is what we're doing and this is what you can do." It is not so obvious to do that on a very small label on a packet. Mr Murray: I think it is also important to recognise there that this is clearly an area where it is not appropriate for us to make a unilateral decision, and that was a key reason for wanting to work with the BSI, because in setting that process up they are the standard setters. We are an advisor to them, but we are an advisor like many others and it is they who hear evidence through their consultation, both the pros and the cons, and their steering group who then decide whether it is appropriate to include it or not. That for me is very important because I like to think we have taken some steps forward in the last couple of years, but there is clearly a huge number of organisations out there with expertise in lifecycle assessment and product carbon footprinting and there is a huge number of other organisations which are key stakeholders here who are either users or reviewers of this information, who rightfully feel they have a part of play in first of all setting the standard, and secondly managing how it is used down the road. Q93 Jo Swinson: Obviously you have got this independent group setting up the standard which any company will be free to use but they do not necessarily have to use the label that you are actually developing. What competition do you think there is for your label from other retailers or producers, and will they go off and develop their own schemes and inasmuch as we now end up with GDA and traffic lights and other information schemes on nutrition, is there a danger that we will end up with lots of different types of carbon labels? Mr Delay: I think there is a danger that we will end up there. In fact, so long as labels have a sound underpinning basis for the measurement, I would be less worried. If labels appear which do not have that sound underpinning fact base, then I would be much more concerned. We are doing all we can to say, "Look, we will develop a label. If it takes us throwing our label into the hat and seeing how it evolves as an industry standard, so be it." That is the right way forward. I think in this country there is a pretty broad consensus that so long as the tent we are building is big enough and enough people can be part of it, then there is no reason why anybody would want to go out and develop their own carbon-specific label. Internationally there has been some interest in our label and our standard, interestingly, and we are getting quite a lot of interest from overseas, but as it stands nothing is preventing anybody from going out and developing their own carbon label, or indeed using the standard which has been developed as a publicly available standard and using that as the basis for another label. Q94 Jo Swinson: Obviously, I am presuming and hope you can confirm that the label still being piloted might end up looking quite different to how it does currently, but you have gone at the moment for this number of grams rather than traffic lights or things like reduced carbon, different types of options. What was the thinking behind going for the number and not a different way of presenting that information? Mr Delay: I think I explained the downward arrow logic and CO2 to make a very clear assessment with climate change. Why not traffic lights? Why not average figures? At the end of the day this is very early days and it would be very difficult for us to say that any of the products that we have put a label on are a low carbon product. We would not say that because we simply do not know. I think we are a long way from having industry and sector standards that you would be able to say that with. So the idea of having a red, green, amber system, or indeed an average system I think is very difficult. There is a second issue here, though, which I think is quite interesting. When you look at salt and salt content, to many people you look at the salt content and you think in terms of, "My health, my heart, and what I'm going to do in terms of salt content." When you look at carbon you can manage your own carbon footprint in a number of ways and you can say, "Okay, I'm going to be particularly careful in looking at my food and drink intake because I want to be able to travel more extensively, because that's a long-term ambition and my family live overseas." Equally, you can say, "Sod it, I'm not going to travel, but I'm absolutely going to enjoy eating and drinking whatever I want," and that is a choice. That is the great freedom that we would have and person carbon trading would allow us to exploit that freedom going further. There is a danger that if you get into the red, green, orange system, or any other form of by category you will end up focusing on the category as opposed to the bigger story, which is what is your carbon footprint and what can you do to reduce it? It is different. Chairman: Okay. Thank you very much for coming in this afternoon. It is a very good start to our inquiry. Thank you. |