[MUSIC] Hi, my name is Olga Chkanikova and today we will discuss greening downstream and look at how third party eco-labeling and eco-branding can be used as corporate tools to create a market for green products. So how can businesses influence the choice that consumers make in the marketplace? Well, there is a number of approaches, like choice editing, priming, and giving products better or more shelf space. But from a business perspective these practices could also be a risky. Take choice editing for example. If a store choice-edits away a certain product, it might risk losing customers to a competitor that still offers this product. And for priming, by advertising sustainability values in your store, you might risk putting conventional products at a competitive disadvantage. And a good shelf placement is usually given to the best selling products or to suppliers that can pay a fee to ensure that their products are granted the best shelf place available. So better shelf placement would most likely be given to conventional producers with a higher turnover which can pay better rates for positioning their products at the best places in the store. So what can businesses do when promoting sustainable consumption clashes with the business rationale to stay competitive and to earn higher profits? How can business bridge the gap between promoting sustainable consumption and enhancing their competitiveness? Third party eco-labeling, and eco-branding are at the forefront of addressing both business needs and needs for sustainable consumption. But very often, eco-labeling is only perceived as a marketing tool, that informs and assures consumers about a product's sustainability performance. Information provision is not always sufficient for changing consumer behavior. And therefore eco-labeling is very often criticized for being inefficient in promoting sustainable consumption. But third party eco-labeling can be also used by firms rather than consumers in order to create a market for green products. From this perspective, eco-labeling can be viewed as an important element of a corporate sustainability strategy to promote sustainable consumption. In particular, third-party eco-labeling can help businesses to lower the costs and risks associated with greening a supply chain. And greening the supply chain is necessary in order to deliver sustainable products to consumers. For instance, resource intensive tasks of defining sustainability criteria, educating and training suppliers and a verifying supplier compliance can be outsourced to independent eco-labeling organizations. These organizations are also known as certification bodies. Outsourcing verification task also remove the risk from the company to be blamed by NGOs if noncompliance with sustainability criteria is revealed. Eco-labeling can also be designed with the purpose of mainstreaming sustainably produced goods, rather than positioning them as niche products that charge a price premium for adhering to superior sustainability performance. 'UTZ Certified' is a good example of an eco-labeling scheme that has been developed by companies with the purpose to promote sustainable consumption. It allows firms, such as Dutch retailer Ahold and Swiss retailer Migros, to mainstream the market for sustainably grown coffee. And now 100% of the coffee sold by these retailers carries the 'UTZ certified' label. This is like choice editing but on a larger scale where unlabeled goods cannot be found on the supermarket shelves. No trade-offs for consumers and no price premium charged. Swedish ICA stores follow the success of the Dutch and Swiss retailers with 100% of its privately branded coffee also being UTZ certified. And UTZ labeling is now been developed to be applied to other agricultural commodities like tea, cocoa, soy, and palm oil. The second corporate strategy to which I would like to draw your attention today is eco-branding. Eco-brands are nowadays quite common among large European retailers, including major supermarket chains in Sweden, such as COOP, ICA and Hemköp. Initially, offering private eco-brands was a mimetic strategy by retailers to imitate their commitment to sustainability in a way other market actors did. But nowadays, the number of private green product lines is increasing with more retailers announcing their commitment to offer 'best in category' eco-friendly products under private brands. Private eco-branding incentivizes retailers' engagement with development of markets for eco-labeled products, by making it a profitable initiative. In particular, private eco-branding contributes to lowering the sourcing costs for sustainable products. While, at the same time, allowing companies to pursue a differentiation strategy from the rest of the eco-labeled products. This differentiation mechanism allows retailers to protect their investments into green market development from competitors with access to the same eco-labeling schemes. European retailers have reported that their private eco-brands have a greater resonance with consumer demand for sustainability compared to third party eco-labels. Let's get more insights into how this is achieved. Due to the market focus, retailers' eco-brands allow for faster incorporation of constantly evolving consumer demands, concerns, and expectations into product life-cycle performance. In comparison to some eco-labels, private eco-brands are not only focused on addressing sustainability concerns. They also account for a number of other consumer preferences such as good quality, taste, and health benefits. So eco-brands allow companies to target a broader spectrum of customers and go beyond the smaller audience of green consumers. Eco-brands also seem to make sustainable consumption more affordable for consumers. For instance, COOP Sweden has implemented a policy not to charge a high price premium for it's private organic brand 'Änglamark' compared to conventional products. And French supermarket Carrefour provides privately eco-branded products for different budget categories. Finally, it is not an exception that privately eco-branded products carry multiple eco-labels. For instance, Änglamark coffee is labeled as both organic and fair trade. This allows to account for various sustainability concerns, further enhancing consumer trust in green products. So eco-labeling, and eco-branding, can be crucial elements in a competitive business strategy, to promote sustainable consumption. By providing a range of services to enable and verify sustainability compliance in the supply chain, third party eco-labeling can remove the corporate need to engage in a resource-intensive process of working with suppliers to green a product assortment. And eco-branding can also help firms to develop the sales of eco-labeled products by making them more market oriented. At the same time, product differentiation based on eco-branding can bring firms higher profits. Therefore, both third party eco-labeling and eco-branding are complementary in facilitating a corporate engagement with greening downstream. [MUSIC]
