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Institutional design of ecolabels: Sponsorship signals rule strength

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  • Nicole Darnall
  • Hyunjung Ji
  • Matthew Potoski

Abstract

Ecolabels are designed to help consumers identify environmentally superior products and services; however, they are not all created equal. Some ecolabels have strong rules that promote environmental improvements, while others have weaker rules that permit free‐riding. Because information about ecolabel design and rule strength is typically not readily available at the point of purchase, consumers struggle to differentiate stronger ecolabels from weaker ones. We investigate whether ecolabel sponsorship is a signal that can help consumers distinguish between ecolabels according to the quality of their institutional design. Using data of 189 prominent ecolabels, we find that while most ecolabels have basic rules for environmental performance, monitoring, and conformance, the strength of these rules varies across labels according to sponsoring organization. Independent sponsors have the strongest ecolabel rules, followed by governments. Industry sponsored ecolabels have the weakest rule structures. Taken as a whole, these findings suggest that sponsorship may provide important information about whether an ecolabel is designed with rules that effectively condition firms to promote meaningful environmental improvements.

Suggested Citation

  • Nicole Darnall & Hyunjung Ji & Matthew Potoski, 2017. "Institutional design of ecolabels: Sponsorship signals rule strength," Regulation & Governance, John Wiley & Sons, vol. 11(4), pages 438-450, December.
    • Handle: RePEc:wly:reggov:v:11:y:2017:i:4:p:438-450
    DOI: 10.1111/rego.12166
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    References listed on IDEAS

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    1. Sofia Brito-Ramos & Maria Céu Cortez & Florinda Silva, 2022. "Do sustainability signals diverge? An analysis of labeling schemes for socially responsible investments ," Working Papers hal-04064367, HAL.

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