Supplementary memorandum submitted by
Energy Saving Trust
Home appliance labelling seems to be one of the
success stories of environmental labelling. Can you explain why
you think it has been so successful in influencing consumer behaviour
and manufacturer standards? What lessons could we carry over into
other sectors?
We agree that appliance labelling has been a
relative success story with sales of A-rated and above cold appliances
increasing from 1% to around 70% and wet appliances from 1% to
86% between 1996 and 2006. But in our view there is still considerable
room for further improvement and expansion of the existing schemes.
Both Energy Saving Recommended (ESR) and the
EU A-G label aim to allow consumers to make an informed product
choice within and across categories. They are mutually compatible
and combine to help increase consumer awareness, improve appliance
standards by incentivising manufacturers to look to the future
and go beyond A-G whilst helping retailers promote the most energy
efficient appliances and for buyers (both retail and consumer)
to demand them from retailers.
A-G is a mandatory requirement, but only for
appliances in eight product groups, that drives the market up
to a point whereas ESR is a clear at a glance label covering 29
individual product groups, which aim for the top 20% of market.
ESR is a differentiator that identifies the best in class, least
damaging products providing certified assurance that a product
is energy efficient. Therefore, ESR is not just a consumer-facing
label but an enabling mechanism to provide stretch and encourage
retailers to stock the best appliances and for manufacturers to
build to better standards. Currently ESR is provided free of charge
with support material eg stickers, stats, facts etc and underpinned
by additional activity eg development of retailers buyers guides,
training of in-store staff, marketing activity (targeted through
our consumer segmentation model). It is easier to revise than
the A-G label providing stretch, particularly in white goods where
there is A-grade bunching, whilst plugging the gap in other product
areas eg ICT, insulation or heating that are not addressed by
A-G labelling.
Key lessons that could be carried over to other
sectors include:
— Keep labelling clear and simple.
At a glance labels are generally more effective than those labels
that adopt a more complicated approach—consumers don't want
to be overloaded with information.
— Avoid anything that might confuse
consumers eg different labels attempting to address the same issue.
— Scheme management should be undertaken
by a trusted and independent organisation and not company self-labelling.
Labelling should certainly not be driven by PR requirements.
— Underpin the scheme through robust,
but pragmatic accreditation.
— Involvement of key stakeholders (as
with the setting of ESR product standards through the ESR Endorsement
Panel) is a key factor affecting the success of the scheme. Getting
standards right is a key challenge for any certification scheme,
and stakeholder consultation is a critical aspect of getting the
standards right.
— Support the label with marketing
and retailer training e.g. in-store at point of sale and through
buyer's guides.
— Support through wider Government
policies. For example, in the case of appliance labelling; fiscal
incentives through the Energy Efficiency Commitment (EEC) now
known as the Carbon Emission Reduction Commitment (CERT) and legislation
to include condensing boilers in building regulations.
Your ESR label indicates the "best-in-class"
in a sector, yet the A-G label already helps consumers to choose
the most energy efficient products. What added value does the
ESR label provide to the consumer?
ESR provides a further enhancement of high energy
efficiency rating for both consumers and manufacturers particularly
where the EU label is not sufficiently discriminating due to bunching
at the high end. It also provides an opportunity to reference
the Energy Saving Trust to help consumers continue their energy
saving journey. Where there is yet to be an EU label established—that
process is long and slow—the ESR label highlights the best
in class where otherwise there would be no discrimination. Currently,
ESR covers over three times as many product groups as the A-G
label.
It also allows consumers to make an informed
choice without having to study and compare labels where they exist
(or attempt to locate and assimilate manufacturer's data where
there are no A-G labels, which the majority of people are not
sufficiently motivated to do). ESR provides assurance, from a
trusted independent source; that a product is one of the most
energy efficient in its product group—unlike the A-G label
where there can be a multitude of A-rated appliances. ESR also
cuts across the different product groups covered by the A-G label,
to highlight the best products in each (ie A, B or C does not
mean the same in different product categories) thereby creating
a level playing field.
Isn't there a danger that the presence of two
different labels might confuse the consumer?
There may be a potential danger from two labels
but as yet, through the 7 years of ESR use and our ongoing waves
of market research, no evidence for customer confusion has been
found. This is because they are complimentary with minimal overlap
as ESR only applies to best in class.
There is a greater risk of confusion from potential
carbon labels that include in-use energy or from the development
of manufacturer or retailer own labels. The latter are also likely
to be far less trusted (as they are not independent) so will not
be as effective.
The ESR certified label is very simple, with no
additional data displayed. Why did you choose this approach, and
are you satisfied that consumers understand what your label stands
for?
ESR aims to provide consumers with a simple
means of identifying the most energy efficient products. There
is no need to include "additional" data because the
ESR endorsement only applies at the highly efficient end. We deliberately
chose to identify only the best products as these are the ones
that people should be using and the ones that will be required
to help meet the Government's climate change targets. In the four
second buying window for consumers when in store, there is limited
opportunity for "additional data", which some consumers
might not understand anyway. We know from consumer research that:
— 65% of people spontaneously recognise
ESR as associated with energy efficiency.
— Almost 90% of those that do recognise
the label understand that the product is one of the best in its
class in relation to energy saving.
— 60% of people recall seeing the logo
in-store.
— For comparison just over half say
they have studied/looked at the EU label (as opposed to see/recognise
it).
— Awareness of the ESR label has been
growing.
— 60% of consumers say they look for
the ESR label when buying appliances.
— Almost 80% of people regard the ESR
label as trustworthy.
— This is underpinned by high levels
of trust in the Energy Saving Trust, particularly when compared
to retailers and manufacturers.
| Trustworthy/impartial
| | partially trustworthy
| not/hidden motives |
| |
| |
| EST | 76% | 19%
| 5% |
| Retailers | 22% | 51%
| 27% |
| Manufacturers | 20% | 54%
| 26% |
| |
| |
We therefore believe that there is a good understanding of
what ESR stands for and that this is sufficient to influence consumer
choice. In our opinion, this can be further increased with improved
marketing and an increased commitment from retailers to stock
and signpost consumers to ESR products. In this respect there
is a greater role for training of sales staff. However, ESR is
currently resource constrained by a small marketing and training
budget and can only be expanded on a relatively slow incremental
basis.
The Secretary of State for Environment, Food and Rural Affairs
suggested to us that it might be useful if, in addition to the
energy rating, labels on appliances showed the average cost of
running the appliance per month. Would it help to relate energy
ratings to expenditure in this way? Is it feasible?
We know consumers are broadly motivated to consider energy
efficiency for two reasons:
| — Money saving | 60%
|
| — Environmental benefits
| 40% |
| |
So anything which resonates with these motivations is likely
to have traction with consumers. In principle, we are attracted
by the SoS's proposal, however we think it will be difficult to
implement practically because:
— The appliance market operates globally but prices
would have to be UK-related and updated regularly.
— There would need to be an agreed standard price
for a unit of energy which consumers recognise/accept as being
close to their price. This is possible in theory but prices do
vary across suppliers (eg incumbent/non-incumbent), tariff types
(eg off/on peak), payment method (eg direct debit/pre-payment)
and annually.
— Costs would also vary substantially depending
on how an appliance is used and the behaviour of the consumer
using it. There would need to be some agreed parameters of usage
along the lines of the "urban cycle" for cars and "basket
of goods" indexes for prices.
— Average use may well be unhelpful as we need to
change behaviours. The inclusion of average running costs is likely
to be most helpful for those products that run continuously eg
fridges/freezers.
— It would confuse messages about products that
have high energy consumption when in full and a standby usage,
and we want people to abandon standby.
— There is a risk that more information might actually
be off-putting for consumers and might actually reduce engagement.
It is interesting to note that some retailers are experimenting
with the concept along these lines; however they are using point
of sale material rather than labelling products.
In our opinion it would be far better to mandate smart metering
and underpin this with tailored information and advice as consumers
would be able to see the real-time affects of their product usage.
We are surprised that Government appears loath to do so despite
the united support of industry, energy suppliers and NGOs.
You suggest in your memorandum that there might be a case for
developing a family of labels to cover key environmental issues—can
you elaborate a little more on what you envisage? Which environmental
factors would be covered?
Our suggestion envisages a family of labels, based along
similar lines to the established ESR brand, that would focus on
the key environmental issues facing consumers by providing clear,
simple, consistent assurance to consumers from trusted and independent
resources, that a product is one of the best in class in relation
to a specific environmental issue eg food (although difficult
due to the many complexities eg soil/protein/organic), energy,
water, waste. Such a family of labels should not require any technical
or energy knowledge to be understood by the consumer and could
include the key characteristics identified earlier in our response.
The family of labels could have a common feel and accompanied
with signposting to the relevant organisation best placed to provide
advice on the issue. This approach could benefit from consistent
marketing and cross-promotion e.g. from websites linked to supporting
literature, use of a standard consumer behavioural change segmentation
model, such as the Energy Saving Trust's mosaic model, and complimentary
market research. Although the most pro-environment individuals
are more likely to be engaged with a range of environmental issues,
the current view of most consumers with respect to the components
of environmentalism is not yet joined up. Thus most consumers
see recycling, water, energy etc as discrete issues and their
behaviour reflects this in that a keen recycler can be a poor
energy saver. We therefore do not see either ESR or the A-G label
as all-encompassing environmental labels on their own.
We would envisage Energy Saving Trust being the relevant
organisation for energy and carbon in the future. We note that
Government's recent work on consumer attitudes and the recent
announcement of Green Homes funding to Energy Saving Trust to
provide energy efficiency, renewables and transport advice plus
water and waste seems to be an early start in bringing these issues
together.
As you add more issues to the certification, isn't there a
danger that it will become more complex not only for you to measure
performance, but for customers to choose a product? Where does
the balance lie?
Yes, there is a danger of over-complicating labelling, which
is why we favour a clear and simple at a glance approach like
ESR that is easily recognisable and understood by consumers. It
is important for certification to be robust but practical, which
is why we have adopted independent third party testing unless
there is justification for an alternative approach eg allowing
white good manufacturer's self-declaration for ESR based on the
original copy of the A-G energy label. We believe this is an appropriate
balance. This is also why we favour separate energy in use labelling
at this current time rather than embodied carbon labelling including
energy in use, which will confuse consumers who don't yet understand
carbon and will complicate the calculation process. The key is
for the claim that is being made by use of a label to be clearly
understood by all (consumers, scheme applicants, other stakeholders).
Consumers don't actually need to know the detail of what happens
to understand the label. However, for a certification scheme to
work effectively the scheme rules must also be robust, sensible
and applied fairly and even-handedly. This comes down to getting
the scheme standards, and the process for assessing conformity
with these, right.
How would the labels need to be presented and operated to make
it obvious that they were a family of labels, rather than a collection
of different initiatives?
Please see above.
You say that you want to extend the ESR label into different
sectors, such as digital radios and housing. Why have you held
back from these sectors until now? Is there a demand from consumers
for the label to extend its range?
Yes, we are extending the scheme as ESR has wide applicability
and is easily transferable. We have prioritised the extension
of the scheme based on:
— Products with high energy consumption.
— Products which consumers recognise for their energy
consumption.
— Available funding to extend ESR. Inevitably this
has acted as a constraint to expanding ESR.
We know that consumers see the next steps for extension in
the home from household white goods, where energy efficiency has
become more ingrained due to the product being left switched on,
to:
— Other kitchen appliances eg cookers, toasters.
— Living room products eg TV and HiFi's. Consumers
see those products as closest to household white goods but this
is complicated by longevity, male/female attitude differences
and branding.
— Lifestyle type products eg PCs and MP3s. Although
consumers see energy efficiency as less relevant, labelling of
these products is further complicated by their short life.
We are developing our medium-term strategy to inform what
further product groups we go into in the future and this could
potentially include the extension of ESR to cars, microgeneration
and homes. In the case of homes, we also need to consider industry
and consumer receptiveness in relation to the linkage between
HIPs and EPCs and that the initial priority should be to get people
to take action on EPC recommendations.
Fast-moving consumer electronics market would need to be
managed particularly carefully and could even entail a different
approach eg a mass market sign-posting label identifying products
with energy saving features. Likewise small electrical appliances
e.g. toasters. We are developing our thinking in this area.
The ESR label shows a maximum of the top 20% in the sector—how
would this translate into a fast-moving sector such as consumer
electronics, or the housing sector, where comparing the full market
is practically impossible? Would you need to adapt the label?
We do not see the need to change the top 20% characteristic
of the ESR criterion. In the homes market, our thoughts would
be to divide it up into new build and existing categories, aligning
ESR to the standard Code for Sustainable Homes bandings and the
EPCs. Likewise in consumer electronics we would look at product
categories within this overall sector, eg MP3 or set top boxes
etc rather than using the scheme to apply across a disparate collection
of energy consuming products. A key advantage of the ESR scheme
over the EU approach is the ability to respond more quickly to
market changes—hence its applicability within a fast moving
sector. Moreover, there is flexibility around the 20% where there
is a need on account of the product structure within the category.
For example, in complex set top boxes, there is one dominant supplier
and it is highly likely that we shall be accrediting over half
of the category. In the future there may also be less scope to
improve product standards in some categories so one could envisage
ESR applying to more than 20% off the market, although this is
some way of for most product categories.
Participation in the ESR scheme is voluntary—is there
a case for obliging all manufacturers to submit their goods for
assessment, or would this have little effect?
Participation is currently voluntary and much is achieved
because decisions to raise the performance bar of ESR periodically
are taken by the industry. While certainly a compulsory scheme
would have much to offer, the Energy Saving Trust feels that a
voluntary scheme, but with clear and stronger government support
that encourages greater participation, would be the preferred
result.
It is not clear whether WTO requirements would allow a mandatory
scheme. The resource requirement to operate this could be substantial
so would need to be prioritised initially on the most energy intensive
product types or for those with the greatest bunching at A (in
the case of those also covered by the EU label). There would also
be little point in testing appliances that are unlikely to achieve
ESR status unless there was a penalty of some form for not doing
so.
What proportion of manufacturers decide to submit their products
for certification?
Unfortunately, we are unable to answer this question, as
it would require knowledge of the entire number of manufacturers
in each product group. Currently there are 148 manufacturers and
suppliers and 70 retailers.
Have any manufacturers produced their own labels, when they
failed to qualify for the ESR label? Would you like to see a situation
where the only environmental labels permitted on appliances in
the UK were the ESR and the A-G label?
There have been no cases where manufacturers have produced
their own labels as a result of failing to qualify for ESR. However,
we have had several incidents where companies make false claims
about ESR certification (ie they use the mark without EST permission),
which does demonstrate the perceived value of the ESR mark within
industry. Indeed currently we have not seen any alternative labelling
scheme—retailer or manufacturer—covering the energy
efficiency domain. In order to avoid potential consumer confusion,
we would like to see a situation where the only two labels in
the energy efficiency related sector are ESR and the A-G label.
However, as previously stated, we do not see ESR and the A-G label
as all encompassing environmental labels.
The table in your memorandum shows that most types of products
are certified on the grounds of the manufacturer's self-declaration
rather than independent testing. How does this work and can we
be confident that manufacturers are providing an accurate assessment?
The majority of products are actually independently tested
by third parties eg all insulation, lighting, glazing and heating
products (other than gas central heating controls) and this is
our preferred approach for existing and new product groups unless
there is sufficient justification for an alternative approach,
for example where an existing testing mechanism is in place. The
case for using manufacturers' self-declaration is always considered
very carefully, and we consult key stakeholders on proposals to
accept self-declaration on a case-by-case basis (eg via the ESR
endorsement panel). Self-declaration is only used where, for example,
independent third party testing would present a genuine barrier
to applicants joining the scheme. For example, it was considered
that this was the case with ICT products, where manufacturers'
self-declaration was accepted by the Energy Saving Trust as part
of the ESR scheme following consultation with industry and the
ESR Endorsement Panel. Similarly, we have also adopted manufacturer's
self-declaration using the original copy of the A-G label in the
case of white goods.
However, there is a higher potential risk with self-declaration,
compared with independent third party testing, that products may
not conform to the specified product standards. We also compliance
test around 5% of certified products every year and consequently
also focus this more on those self-certified products—on
a European scale the Energy Saving Trust is one of the most prolific
independent product testers. We will also be adopting the ISO
best practice standard for self-declaration proformas by the end
of 2007. We are therefore confident that the process is a good
balance between robustness and pragmatism.
Would it be more effective to move to independent verification?
Would this be feasible?
Where other approaches already exist eg A-G labels and worldwide
standards based on self-declaration for ICT goods, we do not believe
that it would be more effective for ESR to move to independent
verification. We have to be mindful of existing standards in the
international marketplace.
Is there a case for the industry self-regulating, where manufacturers
report problems with each other's labels?
One of the key advantages of ESR is that it is managed by
an independent and trusted organisation that provides consumers
with sufficient confidence to believe the energy saving recommendation.
An industry-led approach would not be as effective.In a competitive
marketplace it is not clear whether manufacturers would release
the underpinning data to a competitor that would allow the identification
of problems so a third party would need to be involved for dispute
resolution and compliance testing. We have had tip-offs from manufacturers
about competitors' products in relation to potentially misleading
or false claims, which we actively follow up.
You mention the possibility of a carbon-saving recommended
label—is this sufficiently distinct from an energy efficiency
label to make it worthwhile having the two?
There is a change expected in consumer awareness of carbon
in the next 3-5 years. Our market research shows that less than
30% of consumers understand carbon or its relation to climate
change/carbon/energy linkage. At this point in time, the Energy
Saving Trust does not believe that carbon labelling is appropriate
and therefore we are not planning to introduce such a label in
the very near future. However, once the population is carbon literate
then there will be an opportunity to do so. At this point the
transition from energy to carbon labelling will be actively pursued.
Ultimately, we would like to see just a "carbon saving recommended"
label.
You say that embodied carbon should not be included on a carbon
label—but what if the most efficient fridge is among the
most damaging to produce? Isn't there a contradiction if consumers
are being asked to take account of embodied carbon for some sectors,
and ignore it for others?
As mentioned previously, there is evidence to demonstrate
that people don't yet understand the language of carbon, "footprint",
"offset", "embodied", the relationship between
energy and carbon or the role products play in the carbon footprint.
However, if asked, people will say they want to know the carbon
footprint of products as that is perceived as the right answer—although
completely mis-leading this can be seen as a positive sign!
We have not yet seen any evidence from consumers of the benefits
of embodied carbon labelling although there are clear supply chain
benefits. We believe it is the manufacturer's responsibility to
improve its processes to reduce the environmental damage of its
products and at the current time this is where the focus should
be.
We agree, that there would be a contradiction if consumers
were asked to take account of embodied carbon for some sectors,
and ignore it for others but currently consumers are being asked
to consider the carbon content of isolated products, which they
can't compare even if they wanted to.
However, a mix of messages concerning full carbon footprint,
embedded carbon and carbon in use runs a major risk of confusing
consumers. The Energy Saving Trust believes it is far better and
more effective to provide information to consumers about the areas
under their control rather than under the direct influence of
the retailer/manufacturer. Thus we would contend that embedded
carbon and/or embedded energy is the clear responsibility of the
supply chain. It is through the activities of manufacturers reducing
their carbon footprint on their own account and the choice editing
of the buyers at the retailers, which jointly determine the embedded
carbon of the products on sale. Beyond this point the consumer
determines the usage of the product and it is therefore most appropriate
that the consumer knows the carbon in use/energy in use impacts
of their behaviour from information on the label. In the longer
term, consumer pull should become more important.
Incentives, and where necessary legislation, should be implemented
to curtail unacceptable practices rather than rely on consumers
to understand the consequences of complex manufacturing processes
and then to demand change.
The ESR label was established at the request of the Government—is
a government-backed label the most robust way of bringing about
change?
The most effective means of removing the most inefficient
products from the market place would be to ban them completely.
A Government backed label, operated by a trusted and independent
body such as the Energy Saving Trust, is just one of a range of
policy tools that will be required to help drive the required
changes.
You say that labels should be accompanied by regulation and
incentives—can you give us some examples? Would labelling
be entirely ineffective without these supporting measures?
Simply putting a label on a product on its own is unlikely
to deliver much if anything as it would need to be recognised,
understood and trusted by consumers. Labelling, plus awareness
raising and marketing, would not be entirely ineffective as it
would still signpost consumers to the most efficient appliances.
However, it would certainly be more effective if there were other
incentives for consumers to purchase them and if the option of
the worst products was removed completely. For example:
— The use of progressive taxation policies to incentivise
ESR products and penalise the worst products. The EU VAT discussions,
initiated at the insistence of the UK Government, open the door
for this.
— Stronger linkage of ESR products into CERT.
— For the promotion and marketing of ESR—we
know that retailers want greater promotion of ESR.
— To allow a quicker expansion of ESR to other product
categories.
— For in-store training and promotion of EST advice/helpline.
— Regulate the worst appliances out of the market
including the second hand market.
Are you content that Government is doing enough to support
and promote environmental labelling?
No, we believe Government can do more as identified above.
January 2008
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