Article2014

Competing Environmental Labels

152 citations0/0 files storedJournal of Economics & Management Strategy

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Environmental Sustainability in Business Sustainable Supply Chain Management Global trade, sustainability, and social impact

Abstract

We study markets in which consumers prefer green products but cannot determine the environmental quality of any given firm's product on their own. A nongovernmental organization (NGO) can establish a voluntary standard and label products that comply with it. Alternatively, industry can create its own standard and label. We compare the stringency of these two types of labels, and study their strategic interaction when they coexist. We find that even with error‐free labels, environmental benefits may be smaller with two labels than with the NGO label alone, and we characterize when label competition is more likely to be environmentally beneficial.

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References

2002Legitimacy and the Privatization of Environmental Governance: How Non–State Market–Driven (NSMD) Governance Systems Gain Rule–Making Authority 2007Can non‐state global governance be legitimate? An analytical framework 1999Information Revelation and Certification Intermediaries 1991Minimum Quality Standards, Fixed Costs, and Competition 2011Producer-Level Benefits of Sustainability Certification 2004Environmental quality competition and eco-labeling 2011Label Confusion: The Groucho Effect of Uncertain Standards 2000Down to Earth: Applying Business Principles to Environmental Management

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