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Memorandum Submitted by the Carbon Trust response: Environmental Labelling
Thank you for this opportunity to contribute to the Committee's inquiry into environmental labelling. This submission addresses the Carbon Trust's views from our experience in the development of the product Carbon Reduction Label, currently being piloted across a range of products and services. The note is structured in eight sections: the first section summarises the context of our initiative and progress to date, and the following sections address in turn the specific questions raised in your inquiry.
Context
The Carbon Trust has been working with business and public sector organisations over the last seven years to accelerate the move to a low carbon economy. Energy efficiency has succeeded and will continue to succeed in delivering valuable carbon and cost savings for business. Mitigating climate change, however, will require more fundamental changes to the way that business delivers products and services to the end consumer. The Carbon Trust has been working with companies over the last three years to develop a methodology to measure and identify opportunities to reduce carbon emissions across the supply chain[1].
Building on this work, in March 2007 the Carbon Trust launched an initiative to develop robust standards to measure, reduce and communicate the lifecycle greenhouse gas (GHG) emissions of products and services. The initiative aims to drive action in companies to reduce emissions across the supply chain through transparent, robust and consistent information that serves as a basis for sound decision-making by business, consumers and other stakeholders. The initiative has three components:
§ A method to measure the lifecycle GHG emissions of products and services, currently being developed into a BSI Publicly Available Specification (BSI PAS 2050), working with Defra and the BSI British Standards; § A "reduction framework" to define what constitutes reduction of the embodied GHG emissions of products and services, to help companies make robust claims about what they are doing to reduce them, currently under development; and § Communication principles, underpinning external communications around carbon emissions content and reduction of products and services, including but not limited to consumer-facing labelling, e.g. the Carbon Trust Carbon Reduction Label pilot.
The PAS method is a stand-alone and open standard that may be used for a variety of activities to improve and communicate the GHG performance of a broad range of products and services. The reduction framework and communication principles will build on the PAS but are separated from it. This separation will allow companies to use the PAS measurement method as a standalone tool, e.g. to support procurement or portfolio management; use the PAS measurement method and reduction standard, e.g. to support carbon management across the supply chain and support CSR-driven initiatives; and use both standards and the label to further engage with consumers.
This initiative is being overseen by two independent Steering Groups: one steering group, appointed by BSI, covers the Publicly Available Specification (PAS) for measurement; and the other Steering Group covers the development of the reduction framework and communication principles. Both the PAS Steering Group and the Reduction and Communication Steering Group include members from a range of organisations, representing academia, NGOs, business associations, the government, the Energy Savings Trust and the Carbon Trust. Both groups are led by Jim Skea, Director of the UK Energy Research Centre (UKERC). To ensure that links are made between both initiatives, there is some cross-membership between the PAS and the Reduction and Communication Steering Groups. The process to develop the PAS and the reduction framework and communication principles will include a number of consultations.
In parallel to this work, the Carbon Trust is piloting the Carbon Reduction Label, a public measure of the carbon footprint (embodied GHG emissions) of a product. The label also contains a commitment on the part of the producer to reduce these emissions over a two year period. It has a "reduce or lose" clause with the contract of use; if companies do not reduce their emissions, the label is removed. The Carbon Reduction Label aims to empower customers to make purchasing choices based on carbon intensity which, in turn, drives companies to compete on carbon over time. The label is currently being trialled by Pepsico's Walkers (crisps, on pack), Boots (shampoos, at point of sale) and Innocent (smoothies, on their website), with other companies to follow. New pilots include Coca Cola, Aggregate Industries, Marshalls, Cadbury Schweppes, The Co-op, Scottish & Newcastle, Halifax, Muller and Kimberly Clark. Of these, Halifax have publicly stated their intent to label.
The Carbon Reduction Label was launched in response to a growing market need in this area. Research conducted by the Carbon Trust in November 2006[2] found that two thirds of consumers surveyed wanted to know the carbon footprint of the products they buy. This is consistent with other independent research. For example research conducted by LEK Consulting, a management consultancy showed that 56% of consumers would value product carbon footprint information when making a buying decision[3]. Companies operating in the UK want to respond to this need, and recognise that it is essential that any public carbon information on products and services is consistent across companies. Assurance on integrity has been evident in recent research such the that conducted by Globescan[4], which concluded that 77% of consumers interviewed want independent assurance of company claims on climate change.
The Carbon Trust is committed to creating a single widely accepted standard to underpin this information requirement, working with multiple stakeholders in the UK and internationally. We are making good progress with BSI and Defra in developing the standard (the first version of which is currently under consultation) while we continue to trial the label. We have received significant interest from business wanting to participate in the pilot phase (over 150 companies) and we are currently working with twelve leading companies across food & drink, consumer goods, construction products, services and other sectors, as outlined earlier.
Existing environmental labels and products requiring labelling
There are currently four main types of environmental product label in the UK:
§ The first are energy efficiency labels, notably the EU energy efficiency label to rate the efficiency of white good products, and the EST recommended label to encourage the adoption of energy efficiency appliances. There are also EU labels at point of sale for vehicles and asset & operational labels for buildings. § The second group are social and environmental labels underpinned by standards that cover a wider set of issues, including some specific environmental areas. This group includes Soil Association (organic); Fairtrade (promoting fair international commerce and social issues); Red Tractor (British farm assured); Linking Environment and Farming-LEAF (environmental issues linked to farming); Rainforest Alliance (biodiversity); Forestry Stewardship Council-FSC (sustainable forestry); and Marine Stewardship Council-MSC (sustainable fishing). All these schemes focus on food, with the exception of Fairtrade, which is also being adopted by clothing and other sectors, and FSC, which focuses on timber-based products. § The third group includes carbon neutral labels, such as Penguin Approved and Planet Positive, led by DCarbon8 and focused on the building sectors. These labels combine emissions measurement, some form of emissions reduction and offsetting. To date, these have been relatively niche in terms of their application. § Finally, some manufacturers have developed their own proprietary labels to promote their "green" credentials covering aspects of climate change. Examples include Timberland, looking at carbon impacts of their products or the recently launched Future Friendly Label, developed by Procter & Gamble, that encompasses efficiency in the use of energy, water and waste. These labels are based on proprietary methodologies which have not yet gone through public scrutiny. It is also worth mentioning Tesco's and Marks & Spencer's aeroplane labels highlighting air freighted products.
With the exception of the mandatory EU Energy Efficiency, vehicles and building scheme labels, all schemes are voluntary.
As far as we are aware, the only UK labelling scheme providing carbon footprint information applicable to all products and services in a consistent and comparable way is the Carbon Reduction Label being piloted by the Carbon Trust. Given that all products and services have embodied carbon content and that consumers want to factor this information into purchasing decisions, we believe there is a clear case for an independently verified Carbon Reduction Label with potential application across all sectors. The UK has the opportunity to lead globally on an initiative that has the potential to drive significant emissions reduction across the supply chain. As an example, the analysis of the embedded emissions of Boots shampoo products identified opportunities to reduce the carbon footprint of Boots overall supply chain by 7,400 tonnes CO2e per annum. Boots have already worked to reduce the carbon footprint of their Botanics shampoos by 20% at the back of this work.
What should be shown under a labelling system
Any information about environmental or climate change related impacts to help business and consumers make choices needs to be transparent, robust and consistent, and needs to be based on broadly accepted rigorous standards.
We believe that carbon equivalent[5] (including all six Kyoto GHG emissions) provides a common measure of climate change impact across all products and services. It also covers the carbon related impact of other environmental issues, such as waste, water and land use change. Carbon is therefore a good measure to start conveying complex information in a single metric. In addition, carbon has the potential to become a "common currency", applicable to all products and services, allowing consumers to make decisions on carbon the same way they make them on price, and business to compete on the carbon intensity of their products and services, the same way they do on cost.
Embodied carbon (GHG emissions across the supply chain) can be measured using a number of methods. The draft standard to measure GHG emissions being developed by the Carbon Trust, Defra and the BSI is based on lifecycle assessment, a well established method to measure the environmental impacts of products and services across the product life-cycle. BSI are currently working with us to prescribe the boundaries and data requirements to ensure the right balance between accuracy, to allow consistent comparability, and cost-effective applicability. Sensitivity analysis on the carbon footprint of products from our initial pilot projects (using draft PAS), completed by Oxford University shows an uncertainty similar to that achieved in the UK Government's reporting to the IPCC of national GHG inventories.
To drive action by companies in the short-term, the Carbon Reduction Label has also introduced a commitment to reduce the emissions of products and services over a two year period. This reduction commitment will be underpinned by a separate standard that defines what constitutes a meaningful reduction in carbon content, ensuring the integrity of such claims. In the longer term, once there is a certain critical mass of products labelled, we envision companies will start competing on carbon, driven by consumer demand. This market dynamic could have a great positive impact on the carbon and cost competitiveness of business, since many options available to companies to reduce carbon emissions also generate cost savings.
The case for rationalising environmental labels- reassure on multiple players
We believe that it is important to avoid the proliferation of labels with overlapping purposes. Feedback from business inform us that this will only cause business and consumer confusion and potentially paralyse their behaviour. As an organisation independent of both business and government, one of the key reasons for the Carbon Trust to lead in this initiative is to avoid the fragmentation and lack of broadly accepted market standards suffered in other areas such as carbon offsetting and nutritional labelling. We have been liaising with different initiatives in the UK and internationally to align similar standards into a single recognised approach; we see the BSI PAS 2050 as the first step to create an international standard.
We also believe that trying to bundle a lot of information from complementary labels or standards (e.g. different environmental impacts or social issues) could be technically challenging; trade-offs are not well understood and could be misleading. Furthermore consumers should have the freedom to choose based on their individual preferences. For example, certain types of organic food may be more carbon intensive than non-organic equivalents, and consumers should be able to make choices based on the criteria that are important to them. Likewise, we should avoid the temptation to oversimplify the communications in ways that would be misleading for the consumer. A good example is the common belief that air-freighted products are more carbon intensive than local ones. So while we believe that it is important to avoid a proliferation of labels covering the same information, it could also be misleading to rationalise complementary ones.
In terms of prioritisation of information, again we believe this should be market-led. Our research shows that 74% of consumers consider that climate change is a serious problem that needs to be tackled now. Independent research by LEK Consulting, a management consultancy,[6] shows that roughly one third of consumers recognise that they should be responsible for taking action and another third think manufacturers should lead. Businesses are recognising this trend and prioritising this in their communications. As an example, both PepsiCo (through their Walkers brand) and Boots - the first companies piloting the Carbon Reduction Label - have placed the label in prominent places on their pack space (Walkers) or point of sale (Boots). This reflects a business understanding of what is important to consumers, and provides a great opportunity to accelerate carbon management and emissions reduction.
The impact of environmental labelling on consumer behaviour
Our market research shows that the market is receptive to the idea of a carbon label as a mechanism to provide information about products' embodied carbon, as mentioned above. The initial reaction to the Carbon Reduction Label has been quite positive despite the lack of educational marketing thus far. Recent research by Walkers shows that 78% of consumers are aware of the label, with 70% of consumers (and 75% of concerned consumers) saying that the label makes them "more aware of the impact of the products and services they choose to buy". Research conducted by LEK Consulting2 concluded that 43% of consumers interviewed would be ready to switch products based on their carbon content. More details on the highlights of the research can be found in the appendix.
It is also important to note that there many other mechanisms to influence consumer behaviour beyond environmental or carbon labels. Business and consumer education programmes are still needed to drive behavioural change and maximise impact in this area.
The regulation of environmental labelling - greater emphasis on assuring integrity
As mentioned earlier, the carbon footprint information on the Carbon Reduction Label is measured according to a draft PAS 2050, based on lifecycle assessment techniques and is currently under further development in partnership with Defra and BSI British Standards. The commitment to reduction will be based on a separate standard, also under development.
During the pilot phase of the Carbon Reduction Label, until the completed standards are published, the Carbon Trust is conducting the carbon measurement analysis, certifying the results and awarding the Carbon Reduction Label. This is crucial to ensure consistency of both analysis and communication during the pilot phase. Once the standards are published, we envision that companies will be able to perform the analysis on their own. Independent verifiers will be able to certify that the analysis complies with the standards, should companies wish them to do so. Independent certification will be a prerequisite to awarding the Carbon Reduction Label, which we see as a stamp assuring compliance with the standards. We are currently planning to tender the appointment of an independent accreditation body (e.g. UKAS, ASI, etc.); with a view to developing the accreditation and certification infrastructure shortly after the standards are published. This model is consistent with well accepted best practice. Other labelling schemes such as the Soil Association, Forestry Stewardship Council and the Fairtrade Foundation operate on the same basis. Both the PAS 2050 standard and the reduction standard will be publicly available through the internet. This means that companies will be able to use PAS 2050 (or PAS 2050 and reduction standard) but are not obligated to then use the Carbon Reduction Label
Exports from developing countries
Environmental labelling should, in principle, not have a different impact in developing countries versus developed ones - it is purely dependent on the environmental performance across the supply chain. Specifically looking at embodied carbon, emissions are accrued and measured across the supply chain in a consistent way, regardless of the geography where they occur. Transportation from point of origin can be easily offset by specific local conditions such as climate, infrastructure and technology, making sourcing, production or other parts of the supply chain more efficient. We have seen examples where produce from developing countries were more carbon effective than equivalents in developed countries. For example, a study published in February 2007 by Cranfield University, sponsored by Sainsbury's and World Flowers, showed that carbon emissions from Dutch roses were 5.8 times higher than Kenyan roses, even when the use of air freight is included.
International labelling
We do not consider that either the standards or the labelling scheme will infringe the WTO Technical Barriers to Trade Agreement or Article 28 of the European Treaty (Prohibition of quantitative restrictions on imports and measures having equivalent effect). Neither the standards nor the labelling scheme will impose any direct or indirect restriction on the import of goods from other countries because:
§ The standards and scheme will be voluntary, not mandatory; § The label will be available on a non-discriminatory basis to any companies wherever they are based whose products or services have been analysed in accordance with the standards and who accept the commitment to reduce emissions over a two year period. Furthermore, as stated above, we see the BSI PAS as the first step in creating an international standard; § The standards will not set a minimum specification that manufacturers or suppliers must meet if they wish their products or services to conform to the standards but will merely set a method for measuring the embedded carbon content of products or services and its reduction.
We are, however, inviting WTO to input to the consultation on the standards and will continue seeking professional advice on this matter as the standards and labelling scheme develop.
We would like to assist the Committee in its enquiry in any way possible. If you have any queries or would like to discuss the enclosed in more detail, do not hesitate to call me on 020 7170 7003.
October 2007
[1] "The carbon generated in all we consume", and "Carbon footprints in the supply chain: the next step for business", Carbon Trust, 2006. [2] GfK NOP survey conducted in October 2006. Highlights are included in the Appendix [3] The LEK Consulting Carbon Footprint Report 2007: Carbon Footprints and the Evolution of Brand-Consumer Relationships, 2007. http://www.lek.com/About/carbon.cfm [4] Globeskan for LRQA, March 2007 [5] The information in the Carbon Reduction Label includes all six Kyoto Greenhouse gases expressed in carbon equivalent. For simplicity of communication the term "carbon" and "carbon footprint" is used. In all cases carbon means carbon equivalents. [6] The LEK Consulting Carbon Footprint Report 2007: Carbon Footprints and the Evolution of Brand Consumer Relationships, 2007 |