Product Labeling, Consumer Willingness to Pay, and the Supply Chain
11.4 Conclusion
This is particularly germane under recent mandatory carbon labels being intro- duced in Europe (in particular France’s Grenelle 2 Law passed in 2010). While information about a product’s carbon impact is a very important environmental cre- dence attribute, it may not tell the whole environmental story. For example a product may score quite well with respect to its carbon output yet might be particularly bad for biodiversity or water quality impacts. Under Grenelle 2, France has decided that for some product categories, the carbon label must include other environmental data such as water use and biodiversity impacts (Following the footprints2011). Having a broader label that includes an index over all environmental impacts has its appeal but may have some drawbacks as well. First, an index that aggregates over a broad set of environmental impacts may be very difficult for consumers to understand.
Second, measuring an array of environmental impacts or performance data places increasing burdens on the supply chain, and plays into producers’ concerns about label proliferation and burden (iSeal Alliance2010). Despite these concerns, Wal- mart has recently moved toward developing an index label that describes impacts over a variety of environmental and social factors into a single measurable attribute (Rosenbloom2009).
Limits of Information Better and more complete information may not always lead to large changes in consumer behavior. For example, Teisl et al. (2008) examines WTP for eco-labeled durable goods (for example cars). Perhaps the most interesting finding is that information on the environmental performance of cars did not induce people to switch classes (for example sedans versus SUVs) but did help people get greener within a product class. To change car classes, other large-scale changes need to occur, such as a fundamental change in gas prices. Absent that, the authors argue that an education program in conjunction with a product label is perhaps the only way to induce large changes in behavior.
Environmental information was also most influential in consumer choice when linked with private benefits. Bond et al. (2008) examines organic label claims on fresh produce and explores how information on private health benefits versus a label describing only public health benefits is considered by consumers. They find that the private benefits are more important to consumers than the organic label. However, there are also important interaction effects between the public and private benefits of an eco-label. When health and organic bundling occurs in a label there is more than a linearly additive effect with respect to the consumers willingness to pay for the labeled product. Consequently, from the perspective of designing a labeling program, there are benefits to identifying products where public and private benefits occur together and communicating this information on the product label.
credible label and be easier for consumers to evaluate, it may also require a great deal of information from the product’s supply chain. In that context I discuss what is currently known in the labeling literature about the role of certifier, the degree and content of information, and the limits of labels in influencing consumer willingness to pay for labeled products.
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