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3. Ecolabelling

3.1 What are Ecolabels?
3.2 The Theoretical Foundation of Ecolabelling: Economics of Information
3.3 Economic Analysis of Ecolabels
3.4 Institutional Aspects of Ecolabelling
3.5 Criteria for Ecolabelling
3.6 Experience with Ecolabels

3.1 What are Ecolabels?[14]

Ecolabels are seals of approval given to products that are deemed to have fewer impacts on the environment than functionally or competitively similar products.[15] The rationale for basic labelling information at the point of sale is that it links fisheries products to their production process.

The goal of ecolabelling initiatives is to promote sustainably managed fisheries and highlight their products to consumers. Product claims associated with ecolabelling aim at tapping the growing public demand for environmentally preferable products. Ecolabels generally rely on life-cycle assessment to determine the environmental impact of a product ‘from cradle to grave’.[16] Usually claims appearing on a product must be preceded by a chain of custody exercise that documents that the product was derived from, for example, a fishery certified as being ‘sustainably managed’.

Prior to certification, a set of ‘sustainability’ standards or criteria against which a fishery is to be evaluated must be developed. Achieving and identifying ‘sustainability’ in fisheries is a complex process. The acceptance and credibility of standards is closely related to how the standards were developed, the standards themselves, and the accrediting or certifying process by which organizations are evaluated against the standard.[17]

Ecolabelling programmes usually fall into one of the following categories:

1. First party labelling schemes: These are established by individual companies based on their own product standards. The standards might be based on criteria related to specific environmental issues known to informed consumers through the media or advertising. This form of ecolabelling can also be referred to as ‘self-declaration’.

2. Second party labelling schemes: These are established by industry associations for their members’ products. The members elaborate certification criteria, sometimes by drawing upon external expertise from academia and environmental organizations. Verification of compliance is achieved through internal certification procedures within the industry, or employment of external certifying companies.

3. Third party labelling schemes: These are usually established by an initiator (public or private) independent from the producers, distributors and sellers of the labelled products. Products supplied by organizations or resources that are certified are then labelled with information to the consumers that the product was produced in an ‘environmentally friendly’ fashion. The label (seal) is typically licensed to a producer and may appear on or accompany a product derived from a certified fishery or producer. Producers are usually expected to track the ‘chain of custody’ of their products in order to ensure that the products derived from the certified fishery are in fact those that are so labelled.

In some instances the initiator accredits other organizations to be the certifier. An accrediting body provides some degree of assurance that the certifier has been trained by an accredited training programme and is qualified to perform an evaluation against a specific set of criteria in a given field. While the criteria may be established through a negotiation process among the various interested parties, they are often motivated by the objectives of the initiators of such schemes. Environmental organizations and consumers generally prefer ecolabelling schemes of this type because of the heightened confidence that private commercial interests will not compromise the criteria applied to the schemes and strict compliance with them based on verifiable and impartial certification procedures.

Environmental labels can be either mandatory or voluntary. Mandatory labels are government-backed and could act as a trade restriction for foreign producers (i.e., imports may be rejected if they do not comply).[18] Imports of products that do not comply with voluntary labels are not restricted. In the case of voluntary labels, it is up to the manufacturer to decide whether or not to apply for certification of the product, and the consumer’s choice whether to buy (or import) an ecolabelled product. Voluntary ecolabelling programmes may be funded and supervised by the private sector. Some, however, are government sponsored.[19]

3.2 The Theoretical Foundation of Ecolabelling: Economics of Information[20]

The underlying economic theory for labelling products can be traced back to Stigler’s (1961) work on the economics of information. In Stigler’s work, information is portrayed as a valuable resource, in particular, information on prices. Different sellers may ask varying prices for the same product. Determining the pool of sellers, and prices demanded by each seller for a good, is a time-consuming task. Thus, there is a “search cost” attributable to time and energy expended by the consumer in finding the seller with the lowest price. Of course, the higher valued the good is, the greater might be the benefit of searching; conversely, the higher one’s income, the higher the opportunity cost of searching. Hence, a consumer searches for information (lowest price) until the marginal benefit of additional information equals the marginal cost of obtaining the additional information. As a result, there is a market for information based on the consumer’s willingness to pay for information (or demand), and producers’ marginal cost of providing information (or supply).

Stigler specifically did not, however, discuss search costs in the context of finding the highest quality product. Nelson (1970; 1974) contends that the problem of determining quality levels in the market is even greater than that of determining price levels since information about quality is usually more difficult to obtain than information on prices. In addition, since it is often impossible for buyers to tell the difference between high quality and low quality products, there is an incentive in some markets for sellers to promise high quality products but market poor quality products, as pointed out by Akerlof (1970). Thus, the consumer’s incentive to gather information may be greater for quality than for price in some markets since the consumer faces less uncertainty with respect to prices (Andrews 1992).

Nelson distinguished between two types of products: search goods and experience goods. One can determine the quality of a product by searching, where quality might be defined as price, size of package, or colour. These are search goods. Nelson’s search goods are defined similarly to Stigler’s definition, as those goods that consumers can determine quality of by examining or researching the product. Consumers’ acceptance of producers’ claims will vary by the nature of the characteristic advertised. Advertising may be used by producers to provide consumers with information on the lowest prices among grocery stores in their area and other information. This will lower the consumer’s search costs. Search characteristics that can be readily checked by the consumer before purchase are hypothetically the most accurately advertised.

One also discerns quality by experiencing, such as taste, durability, or maintenance needs. These are experience goods. Now consumers cannot determine a product’s quality until they buy and use it. Consumers will evaluate those goods they repeatedly buy in somewhat the same manner as search goods; bad-tasting food will quickly lose its share of the consumer’s budget. The producer elects to undertake advertising as long as (s)he sees this as a means to increase market share. In addition, producers will generally disclose only information advantageous to them. This competitive disclosure process results in explicit claims for all positive aspects of goods, and causes consumers to be suspicious of goods without claims (Aldrich 1999).

Grossman (1981) assumes that consumers know producers will make the most favourable claim possible for their products. Furthermore, producers who can make a quality claim will do so and consumers will assume that any firm not making a claim has low-quality products.

Caswell and Mojduszka (1996) add credence goods to the list of definitions of goods. In the case of credence goods, one cannot determine quality either through search or experience, such as the nutritional value of a food or production process. Credence goods are more complicated in that consumers cannot determine the product’s quality even after they buy and consume it. In this case we truly have an imperfect market because first, there is asymmetry in possession of knowledge between producer and consumer, and second, because it is not practical for consumers to assess the quality of the product. For example, food safety and nutritional information are considered to be attributes of credence goods, since an individual consumer will not find it practical to test the protein content or food-borne pathogen contamination level of food (Caswell and Mojduszka 1996). The environmental friendliness of a good is also an attribute of credence goods. According to Caswell (1998), labelling can transform credence attributes to search attributes, which allows the consumer to judge quality of the good before they purchase.

Labelling is often the means by which producers provide information to consumers to address the difficulties of a market for a good that has credence attributes, so that consumers may make an informed decision. However, because producers have information that consumers do not, often it is necessary that a third party intervene to ensure that the producer provides the consumer with truthful information. In this climate, either third-party certification is used, or there may be government regulations. Third-party certification is defined as certification done by a body that is not in any way involved in the production, marketing, or consumption of the good in question. This may be a private organization or a public organization. Governmental regulations can mandate labels, formats for labels or controls on voluntary industry claims.

The U.S. Nutrition Labelling and Education Act of 1990 (NLEA) mandates a standardised form of nutrition information with data on macro- and micronutrients found in food. In addition, voluntary claims such as “low fat” are required to conform to the official definition of low fat, such that “low fat” means the same regardless which company claims it for their product and what product has that attribute (Caswell and Modjuszka 1996).

Within the seafood market, consumers may search for products with particular attributes by going to different markets and observing the difference in prices, and perhaps the visible differences in quality (cleanliness of counter, knowledge of wait staff, colour of product, etc). Experience is built up from tasting seafood; perhaps it tastes good to a consumer, or it does not. If one product has an ecolabel regarding its production process, an attribute not easily determined by the consumer, the consumer may choose to purchase the ecolabelled product, even if all other quality attributes are the same for the non-ecolabelled good. Similarly, the lack of an ecolabel on other seafoods may cause consumers to be suspicious of those products.

Recognizing that attributes of goods have value to consumers, Lancaster (1971) characterised consumer demand for products instead as consumer demand for a bundle of attributes, where each product has one or more attributes. The essence of Lancaster’s framework is that a good by itself does not yield utility, but it possesses characteristics (attributes) that create utility.

Kinsey (1993) reflects this characteristic of goods as a bundle of attributes with the graph in the figure below. On the axes of this graph are the prices of different quantities of an attribute per unit of food, and quantity as measured by the quantity of an attribute per unit of food (A/Q).

Figure 1. Demand and Supply of Attributes per Unit of Food

Supply, S, represents quantity of attribute per unit of food available in the market as price increases. The attribute might be increasing levels of quality as measured by environmental friendliness, and the growth of marginal cost implies an increase in marginal costs as the industry supplies increasing quantities of environmental friendliness. The demand schedule, D, represents consumers’ willingness to pay for various amounts of attributes per unit of food, which reflects their perceptions of the benefits they will receive from those attributes (Caswell, 1998), at varying income levels. The demand curves are downward sloping to signify that for any level of income, the lower the price of quality per unit of food, the more consumers are willing to purchase. D3 represents the highest income level, while D1 represents the lowest income level. Thus, if improved quality is a superior product, then demand will shift up as the consumer becomes more affluent.

As Kinsey notes, if information on the quality per unit of food is evenly distributed between producers and consumers, then the intersection of the demand and supply curves will signal efficient market equilibrium. If, however, information is asymmetric (e.g. producers have more information than consumers), then this market equilibrium will not be efficient. An example might be when producers cheat on quality standards by making claims of high quality when it is not true. This is where mandatory, or third-party labelling, can create an efficient market by removing the asymmetry of information between producers and consumers.

Lancaster’s work has been the underlying theory which is used as justification for much of the economic analysis that has been done evaluating consumers’ preferences for seafood safety (Wessells and Anderson, 1995; Wessells, Kline and Anderson, 1996), seafood ecolabelling (Wessells, Johnston and Donath, 1999) and other seafood attributes (Holland and Wessells, 1998). By viewing the characteristics of a seafood product as quality, safety, price, production process, taste, colour, etc., one can evaluate the marginal value of each of these attributes to the consumer

The asymmetry of information on the environmental friendliness of goods between producers and consumers is often reflected by consumers who: 1) may not have sufficient information with which to make decisions; 2) may not know the limitations of the information they receive; or, 3) do not have the knowledge needed to evaluate the information.

Environmental labelling is used to provide information to the consumers. Often the information is presented in the format of self-declarations (Kuhre, 1997). Self-declaration labelling, or producer claims about environmental attributes of the product, is a form of advertising. However, there are several potential problems with self-declarations. For example, there may be confusion if there is not a common definition. “Environmentally friendly” or “sustainably harvested” have no clear meaning (Cude, 1993). Many of the environmental claims made by manufacturers are subject to interpretation; at worst, they are potentially deceptive or misleading. Recent focus groups conducted at the University of Rhode Island (Wessells, Donath and Johnston, 1999) indicated that any environmental labels on seafood must be specific and understandable. “No over-fishing” was information that people felt comfortable with; other phrases, such as “eco-system friendly,” were too vague.

Potential consumer confusion regarding environmental labels may result from a label that obscures other environmental damage done by the product. For example, use of cloth diapers rather than disposable diapers does reduce the amount of solid waste generated, but increases use of water and detergent. Looking at the dolphin-safe label, while we all now know that dolphins are protected from mortality by tuna fleets, one cannot say that this practice has led to a healthier marine eco-system. Dolphins may be protected because boats are avoiding tuna schools associated with dolphins; however, anecdotal evidence suggests that some of these boats are setting nets on juvenile tuna.

In the U.S. the Federal Trade Commission (FTC) has stepped in to regulate environmental advertising to assure truth in advertising; in other words, ensuring that the consumer is not deceived by environmental claims. The FTC has stipulated that environmental advertising must be factual and non-deceptive, verifiable, and scientifically relevant and non-trivial. Self-declarations are not easily verified by consumers. This is one of the reasons that the U.S. Congress passed the Dolphin Protection Consumer Information Act of 1990 after the canned tuna companies began using the dolphin-safe label. The Act requires that a firm using the dolphin-safe label must be able to verify that the tuna is indeed dolphin-safe (Wessells and Wallstrom, 1993). Thus, verification is not done by the consumer themselves, but by the government.

Thus, environmental labelling, in the form of self-declarations often preserves the information asymmetry between producers and consumers. An alternative to self-declarations is ecolabelling defined here as programmes which are voluntary and with independent third-party verification that a good meets specified environmental criteria or standards. If it meets those criteria, a “seal-of-approval” may then be affixed to the product (U.S. EPA, 1998). The criteria are publicly available and uniformly applied.

Third-party consumer ecolabelling can serve three functions in the marketplace: 1) it can provide independent evaluation and endorsement of a product; 2) it can act as a consumer protection tool; and 3) it can be a means of achieving specific environmental policy goals. An ecolabel organization may be a governmental agency, a quasi-governmental body, or a private entity. This organization owns its environmental endorsement symbol or trademark. It licenses the use of its mark for a specified period of time and a specific fee. An ecolabelling organization has usually three tasks: standard setting, certification, and marketing. Standard setting determines the environmental standards a product must meet to qualify for the ecolabel. Certification determines whether a given product meets those standards. Marketing develops consumer awareness of and trust in the claim. Marketing may of course also be done by the producer of the product that is ecolabelled, but the ecolabelling organization must also market the label to consumers so that they will demand to see it on the products they buy.

The effectiveness of ecolabels depends on consumer awareness of the label, and consumer acceptance of the label (trust and understanding). Awareness is generally the result of a successful promotion (National Wildlife Federation, 1996). Acceptance depends on: 1) public understanding of the relevant issues; 2) public understanding of the connection between relevant issues and product choices; 3) an accurate and clearly understood presentation of the product attributes; and 4) an understanding of what specific actions (e.g. purchase decisions) individuals can take in response to the information provided by the labelling programme (US EPA, 1994). For ecolabelling initiatives to be broadly accepted, the issues surrounding labelling must become prominent so consumers will actively look for the labels. Thus, ecolabelling programmes perform a public education role as well. A labelling programme is also more likely to be accepted if it is offered by a credible source.

3.3 Economic Analysis of Ecolabels[21]

There has been very little theoretical analysis of the economics of ecolabelling performed to date. Theoretical analyses include Mattoo and Singh (1994), Sedjo and Swallow (1998), Swallow and Sedjo (1999), Nimon and Beghin (1999a), and Gudmundsson and Wessells (2000). Empirical analyses include Nimon and Beghin (1999b), Wessells, Johnston and Donath (1999a, 1999b), and Johnston, Wessells, Donath and Asche (2001).These papers have investigated the effects of ecolabelling on the environment to determine if the ecolabels will achieve their stated objectives of having a positive environmental impact. Swallow and Sedjo (1998), and Sedjo and Swallow (1999) look at forest ecolabelling, while Gudmundsson and Wessells (2000), Wessells, Johnston and Donath (1999a, 1999b) and Johnston, Wessells, Donath and Asche (2001) focus on fisheries. Nimon and Beghin (1999a, 1999b) address ecolabelling of textiles.

Theoretical Analyses

Mattoo and Singh (1994) discuss ecolabelling in general, unattached to any particular commodity. They argue that, in certain cases, ecolabels can lead to an adverse effect on the environment. In a partial equilibrium model there is assumed to be a homogeneous product which can be produced by two methods; one environmentally friendly, one environmentally unfriendly. In addition, there are two types of consumers, those who are concerned about the environment and those who are not. The key assumption is that concerned consumers are willing to pay more for a product that they are sure has been produced by environmentally-friendly methods than for the same product produced in environmentally-unfriendly methods. Unconcerned consumers react strictly to price, purchasing whichever good is least costly.

If demand for the environmentally friendly product is greater than its supply, the price of the ecolabelled product will increase relative to the price of the environmentally unfriendly product. This will lead to the standard result where there becomes an economic incentive for producers of environmentally unfriendly products to switch to environmentally friendly production.

However, Mattoo and Singh find that, at a particular equilibrium price, if the proportion of consumer demand for the environmentally-friendly good is smaller than the proportion of supply of that good, then ecolabelling may lead to increased prices for unlabelled goods, and hence increased output of products produced by methods detrimental to the environment. In other words, if there is little demand for the environmentally-friendly good relative to the unfriendly good, then it is possible that the price of environmentally-friendly goods would, in equilibrium, be less than for environmentally-unfriendly goods. This would lead the unconcerned consumers to buy the friendly goods, until price arbitrage is created where the prices of friendly and unfriendly goods are the same. This new equilibrium price based on differentiated goods will be higher than the equilibrium price under no differentiation - causing increased production of both the friendly and unfriendly product.

Swallow and Sedjo (1999) use a general equilibrium framework to analyze the effects of mandatory ecolabelling of forest use on the amount of sustainably harvested acreage of forest. The focus of their analysis is whether ecosystem quality, on a regional or global scale, will necessarily improve after the economy adjusts sources of supply to the demands generated by the implementation of ecolabelling. While the authors admit the results from the general case are ambiguous, the analysis shows that there is a potential for certification to lead to reallocation of land away from forestry toward less ecologically sustainable uses, with the possibility of sufficient impact to diminish global biodiversity. If the forest owner is faced with the mandatory choice of becoming certified or removing his products from the market, the forest owner may well choose to reallocate his land to another productive use. That other use may or may not be beneficial to the forest ecosystem.

A conceptual analysis is done under a voluntary scheme in Sedjo and Swallow (1998). The focus is on whether the market will necessarily generate a price differential for labelled and unlabelled wood products. Sedjo and Swallow show that the average price of wood will increase if certification is costly or if eco-consumers generate a sufficiently large increase in demand. These factors could then result in a price increase in labelled wood, large enough to create an increase in demand for non-labelled wood through a substitution effect, putting pressure on supplies of non-labelled wood with potential negative consequences for forest ecosystems. Alternatively, given that certification is voluntary, the forest owner may choose to supply uncertified wood, and that practice may be less damaging to the ecosystem than the alternative use which would have been employed under mandatory certification. In that respect, voluntary certification may be better than mandatory certification; it prevents the land from being allocated to an even less sustainable ecosystem under something other than timber production.

Gudmundsson and Wessells (2000) investigate the role of existing fisheries management systems in success of voluntary seafood ecolabelling programmes, using two critical assumptions. First, it is assumed that there will be a price premium paid for ecolabelled seafood. Second, the products must be differentiable, only by the label (quality in every other sense is the same). Using a static framework, the authors find that if a simple price premium exists for ecolabelled seafood, where that price premium is constant regardless of stock size, the ecolabel will not be effective in providing fishermen or fisheries managers with a greater level of resource sustainability. Even in the case of the optimally controlled fishery, the effort level increases leading to higher exploitation rates and lower stock size. If the premium is instead one in which the highest premium is paid at lower stock sizes, and diminishes as stock size grows, the optimally controlled fishery would decrease its effort levels, while the limited access fishery would either increase effort or increase costs by input stuffing.

The analysis is continued with a dynamic bioeconomic model, in which it is assumed that the fisheries manager’s objective is to maximize consumer and producer surplus. In this case, if the profit margin of the fishery is low and the premium is high, the incentive to respond to the premium is great. If, however, the fishery is already profitable and the premium is relatively small, there is less incentive for the owner of the fish stock to respond to the premium (or the ecolabel).

One of the reasons for ecolabelling programmes is to create an incentive to restore overexploited fisheries, by rewarding management schemes that aim to rebuild fish stocks. The paper also looks at the results if an ecolabel is awarded to a fishery with a stock size below that associated with maximum sustainable yield, but at levels high enough to be paid a premium. The results from the analysis show that the rate of harvest is set lower for the labelled fishery, allowing the stock to rebuild faster, depending on the shape of the premium function and the relative magnitude of the premium to marginal revenue.

Awarding a label to a product from one fishery can cause adverse effects on other non-labelled fisheries. This happens if the premium causes an increase in demand for the non-labelled product, resulting in price increases for the non-labelled product.

Nimon and Behgin (1999a) provide a formal analysis of the welfare and trade implications of ecolabelling schemes. The analysis is of a textile market between an industrialized North and a developing South, and the ecolabelling involves production-process standards. In their stylized model, the North imports conventional textile goods from the South and produces conventional textile goods as well. It is also assumed that the North has a tariff in place on imports from the South. There are fixed costs of certification.

The results from their analysis of comparative statics is that a labelling programme in the North, without participation by the South, is detrimental to both Northern and Southern producers of conventional textiles. Consumers benefit from a larger choice set, but demand for conventional textiles, including imports, decreases. The presence of a specific tariff worsens the decline of imports of conventional textiles. Some of the negative impact on the domestic conventional textile industry can be mitigated by increases in the tariff.

If the South also implements an ecolabel, the South’s producers of conventional textile are even worse off than before, but the South regains market share in aggregate. The issue then becomes harmonization of ecolabels and production-process standards. The analysis assumes that the quality of the ecolabelled good in the South is lower than the quality of the ecolabelled good in the North due to a lower marginal damage of pollution in the South’s environmental quality. Given that divergence in quality, if both the North and South have ecolabels, suppliers in the South would rather harmonize upward, as long as the increase in demand dominates the loss caused by increasing marginal costs due to higher standards. Harmonizing downward would benefit the South’s conventional textiles industry. Upward harmonization imposes further competitive discipline on the North’s ecolabelling industry, thus benefiting consumers with lowered prices.

Empirical Analyses

There appear to be few empirical studies of the market for ecolabelled products, at least within the economics literature. Three of the most recent include Nimon and Beghin (1999b) investigating the market for ecolabelled textiles, while Wessells, Johnston and Donath (1999b) and Johnston, Wessells, Donath and Asche (2001) investigate consumer demand for ecolabelled seafood in the U.S. and Norway.

Nimon and Beghin (1999b) investigate the price premium for “organic cotton,” “environmentally friendly dyes,” and “no-dye” apparel. The data used are price and characteristic data for apparel from U.S. retail mail order catalogs and Internet catalogs, collected between May and October 1996. The data set contained 794 observations including 364 observations of conventional apparel and 430 observations of organic apparel. Of those observations, 117 contained both synthetic/cotton fiber blends.

The analysis is based on a hedonic price function, in which the price of the product is regressed on explanatory variables that account for the various attributes of the good. In this analysis, the variables used to explain price included type of item (pants, socks, T-shirts, etc.), catalog, gender (male, female, unisex), age (baby, youth, adult), dye type (low impact, no dyes), organic cotton categories and shares of organic cotton and synthetic fibers in total fiber content. The results identify a robust premium for organic cotton, with an average premium of 33.8% of total apparel price. The authors could not find any evidence of a premium associated with environmentally friendly dyes, however, there is a discount for the no-dye attribute which mostly reflects cost savings from simplified production.

Wessells, Johnston and Donath (1999b) investigate the demand for ecolabelled seafood (cod, cocktail shrimp and salmon, specifically) in the U.S. market. The methodology used involved gathering data with a survey administered to a random sample of 1,640 U.S. consumers by telephone. The survey was designed so that respondents compared certified (i.e. with an ecolabel) and uncertified (i.e. without an ecolabel) products, whose prices differed according to a premium paid for the certified product. With the exception of differences in certification and price, the two products were identical in all regards, including quality and freshness. Certification was described as a “program... that would label seafood in order to guarantee that it is caught under strict controls that prevent too much fishing. Certified seafood will have [a] new label that guarantees no overfishing. Uncertified seafood will not have this guarantee.”

Consumers were presented with three paired comparisons, in random order, for salmon, cod and cocktail shrimp. The base price varied for each species, depending on the range of common retail prices for each product at the time of the survey. Premiums ranged between -$2.00 and $5.00 per pound. The certifying agency alternated between the World Wildlife Fund (WWF), the National Marine Fisheries Service (NMFS), and the Marine Stewardship Council (MSC). It is important to note that certified salmon was compared to uncertified salmon, certified cod to uncertified cod, etc. The survey did not ask respondents to choose, for example, certified cod versus uncertified salmon.

Data were collected in the summer of 1998 on the household’s geographic location, trust in specific agencies as providers of certification, seafood consumption habits, household seafood and grocery budgets, memberships in environmental organizations, perceptions of the status of Pacific salmon and Atlantic cod stocks, and a variety of other factors with potential impact on preferences for labelled seafood products. On average, about 70% of respondents chose ecolabelled shrimp, salmon or cod over non-ecolabelled.

Econometric analysis was performed to determine what the factors are that influence the choice of ecolabelled over non-ecolabelled products. Using a logit analysis, results suggested that respondents’ preferences for ecolabelled fish are most affected by the size of the premium. As the premium increases, the likelihood that the respondent would choose the ecolabelled product over the non-ecolabelled product declines. In addition, the likelihood of choosing ecolabelled fish differed by species, geographic location of the household, consumer group and was slightly affected by certifying agency. For example, the effect of the premium was negative for all species, but smaller in magnitude for salmon, and greatest for cod. Households on the West Coast of the U.S. were more likely to choose certifying salmon than those in other parts of the nation. Households that were members of environmental organizations were more likely to choose certified fish over uncertified. Other factors found to influence choice of ecolabelled fish were gender - females were more likely to choose ecolabelled products than men; and seafood budgets - those households with larger seafood budgets were more likely to choose uncertified products. These results also indicated that significant consumer education must take place, as fully two-thirds of respondent indicated that they were unsure of the status of Pacific salmon and Atlantic cod stocks.

Johnston, Wessells, Donath and Asche (2001) extend the paper by Wessells, Johnston and Donath (1999b) by examining cross-country differences in preferences. In addition to the U.S. data discussed above, the authors collected data from a virtually identical telephone survey administered to 2,039 Norwegian residents during the fall of 1999. The primary differences in information collected between Norway and the U.S. were that a) instead of cocktail shrimp, the Norwegian survey asked about the smaller coldwater shrimp; b) instead of using the NMFS as a governmental certifying agency, the Norwegian survey used the Norwegian National Fisheries Directorate; and c) the premiums were specified in Norwegian kroner, not U.S. dollars.

Norwegian consumers were less likely to choose certified seafood products, averaging closer to a 50% preference for certified. Approximately 34% preferred uncertified, while a fairly large percentage, 15% gave no answer.

To test the hypothesis that consumer preferences for ecolabelled seafood differ across nations, econometric analysis of an equation similar to that discussed above was performed. In this case, the Norwegian and U.S. data were combined, with appropriate variables specified to determine if there are differences in the two sets of respondents. In order to do the comparison with premiums that were in both kroner and dollars, the premiums were converted into a percentage. Results indicate that there are differences. Again, results indicate that as the premium grows, consumers will be less likely to choose ecolabelled seafood. This effect is even stronger in Norway, thus consumers in Norway are more price sensitive. In addition, consumers in Norway are more likely than those in the U.S. to be influenced by the certifying agency. Those Norwegians who belong to an environmental organization are less likely to choose certified compared to U.S. respondents who are members of environmental groups.

There are several implications from the results of Johnston, Wessells, Donath and Asche (2001). Most importantly, respondents to these surveys were educated about what the product was being certified for, i.e. why it had an ecolabel. Once educated, they were then asked to make their choices between certified and non-certified. The results showed that the majority of respondents chose ecolabelled products, however, that was very dependent on the size of the premium. In addition, the sample of consumers who were surveyed in each country could be considered “educated” consumers - i.e. educated about the meaning of the ecolabel. In reality, when these choices are no longer hypothetical and consumers may be more or less educated about the ecolabels, consumers may be more or less likely to choose products from certified fisheries. That choice will certainly depend on the premium paid for ecolabelled fish over non-ecolabelled, but will also depend on how aware the consumer is about the issue the ecolabel addresses. Furthermore, the consumer must understand the content of the label, i.e. the link between their purchasing decision and effective management of stocks. The analysis of the paper does not provide the authors with the means to compare choices with and without the information on what certification means.

3.4 Institutional Aspects of Ecolabelling[22]

There are several components to the institutional aspects of ecolabelling processes: scope of the certification process, cost of certification, standards for accreditation of the certifier, procedures to ensure chain of custody, standards for the certification process, and accountability of certifiers. The Marine Stewardship Council is used to illustrate these aspects.

In the preamble to the Principles and Criteria of the MSC, a sustainable fishery is defined, for purposes of MSC certification, as one which is conducted in such a way that:

1. It can be continued indefinitely at a reasonable level;

2. It maintains, and seeks to maximise, ecological health and abundance;

3. It maintains the diversity, structure and function of the eco-system on which it depends as well as the quality of its habitat, minimising the adverse effects it causes;

4. It is managed and operated in a responsible manner, in conformity with local, national and international laws and regulations;

5. It maintains present and future economic and social options and benefits, and;

6. It is conducted in a socially and economically fair and responsible manner.

The Principles and Criteria at this stage apply only to marine fishes and invertebrates (including but not limited to shellfish, crustaceans, and cephalopods). Aquaculture, freshwater fisheries and the harvest of other species are not currently included (MSC, 1998).[23]

Award certification is a single certificate that can be displayed in the client’s offices or with marketing materials. All public claims (i.e. product labels, brochures, etc.) must be reviewed by the certification body and/or the MSC for accuracy before release. The awarded certificate gives the right to use the MSC label on containers of fish or the product itself. The fee for the use of the MSC Logo is based on the value of the product at the first point of sale after application of the Logo and is payable by the company responsible for applying the Logo to the product. The fee has been set initially at 0.05% of the first-point product value (e.g. $500 per $1,000,000) but could increase to 0.1%. A minimum license fee of $500 applies. As the license agreement has to be renewed every year, the above are annual rates.

Scope of the Certification Process

The first institutional aspect of ecolabelling programmes to be addressed is the breadth of the certification process, i.e. determining if the production sector (fishery or farm) is the focus, or if the certification process includes the processing sector as well. Expanding from that, the process could cover the entire life cycle of the product.

The scope of the certification process of the MSC depends on the complexity of the fishery. In the initial review of a potential fishery assessment, the assessment team visits the fishery and solicits views of the stakeholder groups of that fishery. That review will determine if it is possible to clearly define a certifiable entity (MSC, September 1998). This may include a fishery or fish stock (biologically distinct unit) combined with fishing method/gear and practice (vessels pursuing the fish of that stock). Stocks of fish may be combined into a certification unit in mixed fisheries (MSC, September 1998). In the case of the Alaskan salmon fishery, the scope of the certification assessment covered all species, all gear types and all river systems (

Procedures to Ensure Chain of Custody

In the cases of certification of fishery products from sustainable fisheries, agricultural products from organic production and forest products from sustainable forestry, once the product leaves the place of production there must be a means to follow it through to the processing, wholesale and retail stages. Thus, chain of custody becomes very important. This process requires that, in some fashion, the processing, wholesale, distribution and inventory management of the product must keep separation between certified products and uncertified products. Without chain of custody certification as well, certified and uncertified products could be blended. One of the perceived benefits of ecolabelling programmes is the higher return from consumers’ preference for ecolabelled product and the premium consumers are willing to pay. It may be tempting to market products as ecolabelled when in fact they are not, to achieve the higher returns. Thus, chain of custody procedures must be in place to ensure the integrity of the product that reaches the marketplace.

With respect to fish catching and processing, chain of custody procedures are implemented at the key points of transfer (i.e. extraction from the sea, receipt on board, delivery to the dock, broker, wholesale dealer, processor, retailer). A contractual agreement is established between the recipient body and the certification body stipulating standard compliance guidelines and ongoing monitoring guidelines. Precisely established chain of custody procedures are to be implemented on a case-by-case basis. However, there are some basic requirements drawn up in the MSC documentation (MSC, September 1998).

1. From the boat to the dock:

a. All containers of fish must bear a tag identifying the fishery of origin.

b. At the dock, all certified fish must be segregated and identified separately from non-certified fish

2. From the dock to the processor, wholesale dealer or retailer:
a. Upon arrival at the processor, wholesale dealer or retailer, all certified fish must be segregated from non-certified fish.

b. All certified fish must be segregated and identified during storage and shipment.

3. From the processor to the wholesale dealer or retailer:
a. Only certified fish may be run in a single production shift, or the certification body must approve some other precautions that are taken to ensure continued segregation and identification of certified from non-certified fish (for processors).

b. All certified fish must be segregated and identified during storage and shipment.

c. Until and unless automated coding mechanisms are employed only certified fish may be run within a single production shift (i.e. on a batch basis).

In the test case of Western Australian rock lobster, the primary mechanism being used is the application of a one-time use tag which will be applied to the base of the lobster antennae. The chain of custody assessment was done by Scientific Certification Services (SCS). SCS indicates that because of the strict product tracing systems required in order to meet Hazard Analysis Critical Control Point (HACCP) and other requirements, few additional measures are required to satisfy the MSC chain of custody requirements (Jonathan Peacey, MSC, personal communication, Feb. 17, 2000).

The certifiers must also ensure that chain of custody of certified fish is documented with pertinent records, including as appropriate customs inspection documents, verification of species inspection documents, bills of lading with copies for all links within the transportation system, and invoices from all parties who took possession of the certified goods.

Furthermore, certification bodies shall as a minimum:

1. Review and reconcile all pertinent records.

2. Reconcile itemised bills of lading and invoices with the actual loads.

3. Establish that appropriate measures are being taken by recipient to segregate certified versus non-certified products.

4. Review physical parameters (i.e. marking of fish containers and established locations of certified versus non-certified sources).

5. Review administrative parameters (i.e. written protocols for maintaining segregation, employee training manuals, implementation of employee training, etc).

Standards for accreditation of certifiers

In evaluating certifiers for potential accreditation, all assessments are done by the MSC Secretariat. There are several general criteria that the certification body is assessed on, listed below. All are reproduced directly from MSC, February 1999a.

1. Compliance with MSC requirements

2. Independence

3. Sound assessment procedures

4. Transparency

5. Reciprocity

6. Public Information

7. Verifiable chain of custody

8. Compliance with applicable laws

9. Equity of access

10. Maintaining adequate documentation

11. Appeal procedures

12. Integrity of claims

MSC (February 1999b) further defines standards against which the applicant certification firms are evaluated. The objective of the evaluation is to ensure that: 1) accredited certification firms conform with all the requirements of the MSC accreditation criteria; and, 2) systems are in place to enable the MSC to monitor the continued compliance by accredited certification firms with these requirements.

Several certification firms have applied to the MSC to become accredited, including firms in the U.K., Netherlands, U.S., Canada and Germany. As of October 2001, MSC has accredited five companies to act as certifiers of both the fishery and the chain of custody and three companies for certifying the chain of custody only (

Standards for the certification process

It is extremely important the certification process be clearly defined, and applied to each individual case in the same fashion. In the case of normal manufactured goods, this may be relatively easy to achieve. However, there are aspects of the certification process that are very difficult when working with products from marine capture fisheries. In particular, the MSC requires that the certification body put together a team of their staff and specialists from relevant disciplines, including certification methodology, fisheries, fisheries management, marine biology, ecology, economics, wildlife conservation, sustainable resource management and decision sciences (MSC, September 1998). The purpose for this team is: 1) to be able to cover the complex issues involved in the certification process such as stock assessment, identification of habitat impacts, management plans, legal issues and economic consequences; and 2) to ensure that the MSC Principles and Criteria are assessed with equal rigor across fisheries and as objectively as possible. It is emphasized that the certification body’s competence is partly demonstrated by its ability to put together an appropriately competent team of assessors. An interdisciplinary team of experts is assembled to conduct an assessment.

Two potential difficulties present themselves here. First, it may be difficult to find individuals to serve on the assessment team who are sufficiently knowledgeable. Second, even with a team of knowledgeable experts, by simple virtue of the differences in complexity across fisheries of the world, it seems that it may be difficult to apply the criteria even-handedly.

Accountability of Certifiers

The MSC must be fully informed of the status and progress of a certification firm’s programme. The MSC must be able to keep members of the public and other certification firms fully informed about the certification status of fisheries and suppliers of certified fish and fish products.

There are several steps in the certification process of the MSC. First, there must be an initial meeting of the certifying firm with the client. This review results in a few different outcomes. First, the client is informed in detail of the requirements of the MSC Principles and Criteria to make sure that the client understands what they are attempting to conform with. Second, the meeting produces a decision regarding whether it is possible to clearly define a certifiable entity and unit of certification. Finally, the estimated cost of the assessment will be provided to the client. This is a fixed fee, and depends on the estimated time necessary to conduct the assessment and prepare a peer-reviewed written report. There is also a stakeholder consultation. For example, in the Alaskan salmon certification process, the certification firm was required to contact stakeholders in the fishery for consultation to ensure the broadest possible range of views on issues pertaining to the sustainability of this fishery.

Costs of Certification

In any ecolabelling programme of marine capture fisheries, the costs of certification are of particular interest to economists, as well as to those involved with fisheries worldwide. Unfortunately little information is available on exact costs paid by fishers on the cost of certification. An account of certification costs for the Western Australia Rock lobster fishery is shown in Box 5. Full cost of certification is determined between the certifier and the client, and depends on the size and complexity of the production process. For fisheries certified by the MSC, the test cases so far suggest that pre-assessments are likely to cost in the range of US$3,000 to US$25,000, and a full certification could be from US$15,000 to US$150,000 (Jonathan Peacey, MSC, personal communication, Feb. 17, 2000).

Box 5. Assessment and Certification Costs in the Western Australian Rock Lobster Fishery

The Western Australian Rock Lobster Fishery is one of the most valuable fisheries in Australia with an annual export value of about A$ 370 million (US $ 185 million). It involves a fleet of 596 boats (12-18 m length) and generates direct employment for some 4000 people in mostly rural communities.

The pre-assessment of the fishery took place over a period of several weeks in 1997 while the full assessment was undertaken in the period July to October 1999. The final public summary of the assessment report was published in April 2000 and can be found on MSC’s website (

“The direct costs of the assessment process were in the vicinity of Aus$200,000 with at least a further A$100,000 in-kind contribution by the industry and the Department of Fisheries. The subsequent launch and promotion of the MSC accreditation also added a further A$100,000.

The rock lobster fishery operates under a cost recovery regime where fishermen’s licence fees are used to cover the costs the Department incurs in managing the fishery. Therefore much of the costs to meet the requirements for ongoing accreditation will be met through industry’s annual licence fees. It is anticipated that the next full assessment in 2005 will cost an additional A $100,000 - A $150,000. While the costs cannot be readily separated from other marketing and promotional costs, the industry itself, and particularly the processing sector, also continues to incur costs in promoting the MSC accreditation and labelling its product as MSC accredited. “ (Cost information communicated by Mr Ross Gould, Supervising Fishery Manager Commercial Programs, Department of Fisheries, Government of Western Australia)

The license fee for the use of the MSC logo is currently set at 0.05% of the catch value at the point of labelling. This would add another cost of A$ 185,000. These direct assessment, auditing and logo licensing costs are very small in relation to the value of the fishery. There are some incremental management and assessment costs to fulfil the requirements for continued certification including the conduct of an ecological risk assessment, the development and operation of an environmental management strategy, and improvements in the collection of bycatch data. These additional costs are not expected to amount to a significant share of the fishery value.

The client may be a private firm (for chain of custody), but when certifying the sustainability of a fishery the client may be a public agency since fish stocks are typically managed by local or national governments. In other words, a farm produces organic apples; then the farm owner pays to be certified as producing organic apples. However, in the case of fisheries, the question of who is paying for the certification becomes a very interesting one. For example, for the Western Australian rock lobster, it appears that the industry and regional government split the costs of certification (Fiorillo, 2000). In the case of Alaskan salmon, the Alaska Department of Fish and Game is paying for the certification (Welch, 2000).

Generally, there are two costs of certification that are referred to: 1) pre-assessment costs; and 2) actual certification costs. However, there is potentially a third, and more significant, cost to certification, namely cost associated with changing fisheries management. That cost is much more difficult to quantify. In the case of those fisheries that do not qualify for certification, presumably there will be major changes needed in the management system. For those fisheries which do qualify, but whose continued status of certification is dependent upon further improvements in the fishery’s management, the costs may be less. Those costs may include the costs of keeping better records of data (population assessments, harvest, etc.), as well as more fundamental changes in management procedures.

3.5 Criteria for Ecolabelling[24]

There are no a priori criteria that can be considered essential or can be automatically discounted for products arising from fisheries. Within any labelling scheme, the criteria selected for inclusion in an ecolabelling scheme will reflect a compromise between the demands of the consumers and the capabilities and willingness of the producers, and intermediates, to meet those demands. Hence, in principle, labelling schemes in fisheries could aim to encompass all or any subset of the environmental, biological, social, political or economic issues that enter into a fisheries venture.

As discussed earlier, environmental labelling, under which ecolabelling falls, attempts to identify “consumer products which are more environmentally friendly than other functionally and competitively similar products” (OECD 1991 p.12). This approach still leaves scope for interpretation, and clear agreement on what is fundamental to ecolabelling has not been reached. One of the more significant issues is whether or not to include factors relating to the social and economic circumstances of the fishers and shore-based workers. At the FAO Technical Consultation on the feasibility of developing technical guidelines for ecolabelling fisheries products,[25] there was disagreement about whether or not to consider social and economic criteria in technical guidelines for ecolabelling. The Marine Stewardship Council has included in its definition of a sustainable fishery, the necessity for it to be conducted in a “socially and economically fair and responsible manner”[26]. Similarly, the National Fisheries Institute of the USA, representing the interests of its fish and seafood industry members, includes within its Principles for Responsible Fisheries, considerations for the safety of fishing vessel crew.[27]

Given the uncertainty concerning inclusion of social and economic criteria, in this review emphasis is placed on the sustainable use of the exploited natural resource. The discussion below is intended to put forward possible considerations in selecting criteria and not to be prescriptive. Representatives of the different interested parties, including the producers, processors, retailers and consumers, should jointly develop the set of criteria actually applied in any ecolabelling scheme. The criteria should be developed in a participatory and transparent process, and the criteria selected should be “practical, viable and verifiable”.[28]

Figure 2. A Simplified Representation of the Fisheries Management Process

Practicality and verifiability are two very important requirements in assessing fisheries where high levels of uncertainty, arising from poor understanding of important ecosystem principles in aquatic systems, and the difficulties of measuring what is there and what is happening in the sea, commonly prevent totally objective interpretation of the status of stocks and ecosystems. This may prove to be a substantial obstacle to widespread application of ecolabelling schemes in marine capture fisheries.

With these provisos, the potential considerations in ecolabelling can best be illustrated by considering the fisheries management process itself (Figure 2). In this representation, the management system is considered as consisting of:

1. A legal framework;

2. An institutional framework;

3. A process of monitoring the status of the resources and the impact of fishing on them (and the socio-economic performance of the fishery);

4. The transformation of the data and information received into estimates of the abundance of the resources and their prognosis given different management strategies;

5. A consultative or joint decision-making process which should at least cover selection of management measures but could embrace the whole management system;

6. The actual selection of management measures such as setting the TAC, changing gear regulations, implementation of a closed season etc.;

7. Implementation of the management measures, leading back to step 3.

Assessing the Process or Assessing the Result

Within each of the sub-processes listed above and shown in Figure 2, an ecolabelling scheme could consider the theoretical effectiveness of the approaches used or the results achieved, potentially yielding markedly different results. For example, in many developed countries, sophisticated and theoretically adequate management systems and legislation are in place, which would lead to the award of an ecolabel if based on the process. However, in many of these cases and for different but, arguably, largely socio-economic reasons[29], the systems fail and the stocks are over-exploited. If the status of the stocks was the essential factor, such fisheries could not be granted an ecolabel. In reverse, while rare, there are still instances of under-exploited, and hence healthy, resources that are the subject of inadequate or non-existent management. However, in such cases it is unlikely that the data would be available to assess and monitor the status of the resources reliably, which should disqualify even healthy stocks from qualification for ecolabels.

The question of assessing the process or the result was discussed at the FAO Technical Consultation on ecolabelling, but no conclusion was reached[30]. Nevertheless, it is hard to envisage a set of criteria intended to give reliable information on the sustainability of a fishery that did not give consideration to both.

Consistency with the Legal Framework

For ecolabelling, all fisheries should take place within a legal framework embracing any national fisheries legislation and regulations pertinent to fisheries, any multilateral or regional legal arrangements, and the growing body of international laws and agreements, such as UN 1982 Convention on the Law of the Sea, the 1993 FAO Compliance Agreement and the 1995 UN Fish Stocks Agreement. A further consideration, which was accepted by the FAO Member States[31] and also by the National Fisheries Institute[32], is that fisheries should be consistent with the FAO Code of Conduct for Responsible Fisheries. While non-binding, the Code is the most comprehensive globally accepted consideration of the requirements for sustainable fisheries available and therefore provides a benchmark against which fisheries sustainability criteria could be measured.

Compliance with the international and national legal context in which a fishery operates must be seen as being essential for award of an ecolabel.

An Appropriate Institutional Framework

Much has been written about the importance of having the correct institutional framework for effective fisheries management[33], but there is still little clarity on the essential features of the institutions underlying the process. However, Noble (2000)[34] has attempted to summarise some general criteria. He lists the following principles.

1. Organizations involved in fisheries management should be interactive, facilitating coordination.

2. There should be local control. The argument for bottom-up management is that top-down control gives little power to the fishing community and hence encourages dissent and non-compliance[35]. Noble therefore suggests that ownership and control should be delegated to the “lowest, feasible territorial scale.”

3. Effective fisheries institutional arrangements clearly require community support and Noble suggests that this is only likely to happen where the users participate in the management process.

4. Fisheries management must be a planned process, requiring goals, objectives and a strategy to achieve those goals. Noble also stresses the need for flexibility, or adaptive capacity in the institutions and management systems, and the fact that the planning process must be knowledge-based. The Code of Conduct emphasises that “Conservation and management decisions for fisheries should be based on the best scientific evidence available, also taking into account traditional knowledge... as well as relevant environmental, economic and social factors.”[36]

5. Noble suggests that the institutions must also be marked by secondary characteristics related to equity, the economic development of the users and the sustainable use of fishery resources.

6. The institutional arrangements must be holistic, which incorporates inclusiveness and integration.

This list does provide a useful summary of the characteristics of fisheries management institutions that are conducive to success, and hence gives a practical perspective on characteristics that could be considered in determining ecolabelling criteria. The MSC has included most of these features in their ecolabelling principles, as indicated in Box 6. Eco-system considerations are also included in the final report of the Nordic Technical Working Group on Fisheries Eco-labelling Criteria that was adopted by the Nordic Ministers of Fisheries in August 2001 (Box 7).

The efficacy and appropriateness of different characteristics of fisheries management institutions are probably the criteria most affected by regional and national differences in culture and society, and such differences need to be carefully taken into account in designing and implementing the criteria. The FAO Technical Consultation on ecolabelling recognised this and highlighted “The need to take regional and national differences into account in any possible development of guidelines on ecolabelling ...”[37]. Perhaps, considering this need and the difficulty of generalising, this is an area where the result, including in terms of user compliance and contentedness and probable sustainability, should be given considerably greater weight than the process itself.

Box 6. Excerpts From Principle 3 of the Marine Stewardship Council’s Principles and Criteria for Sustainable Fishing: Marine Stewardship Council. 1998. Op Cit.

Numbering as used by MSC but some points have been shortened as indicated in each case.

The management system shall:

2. demonstrate clear long-term objectives consistent with MSC Principles and Criteria and contain a consultative process that is transparent and involves all interested and affected parties so as to consider all relevant information, including local knowledge....;

3. be appropriate to the cultural context, scale and intensity of the fishery - reflecting specific objectives, incorporating operational criteria, containing procedures for implementation and a process for monitoring and evaluating performance and acting on findings;

4. observe the legal and customary rights and long term interests of people dependent on fishing for food and livelihood, in a manner consistent with ecological sustainability;

5. incorporates an appropriate mechanism for the resolution of disputes arising within the system;

6. provide economic and social incentives that contribute to sustainable fishing and shall not operate with subsidies that contribute to unsustainable fishing;

7. act in a timely and adaptive fashion on the basis of the best available information using a precautionary approach particularly when dealing with scientific uncertainty;

8. incorporate a research plan...;

9. require that assessments of the biological status of the resource and impacts of the fishery have been and are periodically conducted;

a) specify measures and strategies that demonstrably control the degree of exploitation of the resource...
11. contains appropriate procedures for effective compliance, monitoring, control, surveillance and enforcement which ensure that established limits to exploitation are not exceeded and specifies corrective actions to be taken in the event that they are.

Monitoring and Assessing the Status of the Stocks

Sub-processes iii) and iv) of the management process will be treated together, as they are integrally related. As discussed above, social and economic performance of the fishery will not be considered here.

Defining the Unit Stock

The initial task in any ecolabelling scheme will be to define the unit stock to be certified. Ideally, the chosen stock should be consistent with the rigorous definition of a stock: the fished and managed unit should be a self-contained and self-sustaining sub-population with no emigration or immigration i.e. it should be effectively genetically isolated from any other stocks. In practice, more pragmatic definitions of a stock are frequently used and the objective in fisheries management is to identify and manage a spatially defined and functionally independent population unit such that the results of assessment and management will be much the same as if the unit were a true stock.

The problem becomes more complicated when one is dealing with a multispecies community but the approach to defining a multispecies “stock” remains similar. In such cases the multispecies “stock” should be defined as a functionally independent community of interacting single-species stocks or populations. Again, the criterion for determining whether the selected unit “stock” is appropriate is whether the assessment and management results are consistent with what would be expected if the multispecies “stock” was reproductively completely independent and genetically isolated. If immigrations and emigrations are of sufficient magnitude to generate significant deviations from the expected results, then the definition is inappropriate.

Monitoring and Collection of Data

The collection of reliable, timely and suitable data or information to enable the rigorous estimation of the status of the resources being affected by the fishery is fundamental to any assessment of the environmental impact of the fishery, and this will require a system which is statistically sound, functioning and sustainable and addresses the stocks affected by the fishery and their key parameters. The scale and level of sophistication of the data and information collected may vary and this is discussed further under the precautionary approach below.

Assessing the Status of the Stocks

Collection of data is not enough on its own, and the data and information collected must be periodically analysed to arrive at estimates of the status of the different resources. This requires use of appropriate statistical and mathematical tools, as encompassed by the subject of fish stock assessment. A principle of any scientific venture is that the process must be transparent and documented in a way that allows independent verification. Such independent verification should be a feature of the management system. The status of stocks is generally expressed in terms of biological reference points, which typically refer to desirable or undesirable levels of abundance in relation to some optimal level or to the average pristine level. The use of such reference points as guides to selecting appropriate management measures is essential in effective fisheries management and the Code of Conduct calls for target and limit reference points to be used in guiding management action.[38]

Box 7. Nordic Fisheries Ecolabelling Criteria

The Nordic Technical Working Group on Fisheries Eco-labelling Criteria proposed a voluntary, consumer driven scheme for marine capture fisheries with state authorities establishing criteria that then can be used by private bodies and NGOs to ecolabel products. The group considers these criteria to be suitable for use in the North-eastern Atlantic region. The criteria are as follows:

Fish Stock:

1.1. The fishery must follow a fisheries management plan.

1.2. The fisheries management plan must be based on regular (e.g. annual) scientific advice on the state of fish stocks and recommendations for their sustainable exploitation.

1.3. The fisheries management plan must include pre-agreed management measures that come into force immediately when relevant precautionary reference points are reached.

1.4. Efficient monitoring and control mechanisms must be in place.


2.1. Destructive fishing practices, such as the use of explosives or poisons to kill fish, are not used.

2.2. Discards of fish, crustaceans and molluscs are minimised through the use of the best available technology for selective fishing methods. Discards are monitored through a sampling programme.

2.4. Management plans should exist for any other ecosystem issues properly identified, based on scientific advice, as being of serious concern in the fishery in question.

Source: Nordic Technical Working Group on Fisheries Eco-labelling Criteria. 2000. An Arrangement for the Voluntary Certification of Products of Sustainable Fishing, Final Report Copenhagen, June.

Most stock assessment techniques and biological reference points are based on single species assessments, and particular problems in evaluating whether or not a resource is being utilised sustainably are encountered when dealing with complex multi-species assemblages as typify, for example, tropical fisheries. Under such circumstances, it is frequently impractical, if not impossible, to assess the status of all the population groups within the community. Fisheries management has not yet devised rigorous methods of assessing, and indeed managing, such complex multispecies resources. However, in general terms, assessment of their status needs to look at changes over time in total abundance, productivity, age/size structure (at least of selected indicator species), mean trophic level and biodiversity, ideally in relation to pristine or some other known sustainable state. Under such circumstances, particular attention may need to be given to species within the community that are known to be particularly threatened.

The difficulties in certifying multi-species fisheries are of course not confined to tropical waters. Some details of a multi-stock certification are given in Box 8 on the example of the U.S. Alaska salmon fisheries.

Box 8. MSC Certification of U.S. Alaska Salmon Fisheries: An Example of Multi-stock Certification

Alaska’s statewide commercial salmon fisheries management program has been certified to meet the MSC Fishery Standard. Salmon management in Alaska is based on legal mandates and biological principles that apply throughout the State. The salmon program is uniformly escapement-based, using in-season stock assessment and monitoring, with harvests based on abundance measured in-season. Regulations require all stocks and fisheries to be periodically reviewed to assure sustained yield principles and criteria are met. MSC certification did not attempt to separately assess each of Alaska’s many thousands of salmon runs and fisheries. However, the certifiers did consider evidence on the extent to which the statewide goal of sustainable management has been achieved in respect of salmon stocks. Statewide certification is only possible due to internal regulations, policies and procedures that assure each stock and fishery in the state is monitored, and any management or conservation deficiency is identified and addressed through management, research, or regulatory action as appropriate.

Salmon stocks are generally mixed until each stock reaches its spawning ground. Unless salmon are taken on spawning grounds, which would be a poor practice, virtually all salmon fisheries occur in mixed stocks. In mixed stock fisheries, stocks are subjected to harvest at a rate that is a function of their proportional distribution within the mixed stock. Alaska’s mixed-stock fisheries policy requires that stocks, when mixed, be exploited in proportion to their occurrence.


Ecological Criteria

It has been recognised in recent years that the single-species paradigm which has and continues to dominate fisheries management is inadequate for optimal, sustainable and responsible utilisation and management of living marine resources, and there has been increasing emphasis placed on the need to adopt an ecosystem approach in fisheries management. Such an approach must clearly also be included in an ecolabelling scheme, with the over-riding interest in environmental impacts.

The incorporation of ecosystem criteria in a scheme will add substantially to the complexity of an evaluation, requiring attention to be given to:

1. The impact of fishing on bycatch species and whether or not such species are being harvested on a sustainable basis;

2. The level of discards and the extent of wastage in the fishery;

3. The impact of the gear on the physical environment and the long-term consequences of this;

4. The existence of ghost fishing by lost or abandoned gear and the attempts made to minimise this; and

5. The levels of any pollutants being released through the fishing activities.

Most difficult of these criteria to consider will be the impact of fishing on ecosystem structure and function. Ecosystems are dynamic and undergo natural changes, including frequently substantial fluctuations in abundances in constituent populations. It is and will be very difficult to distinguish such natural changes from fishery-induced changes. The only approach, especially in the absence of long time series of the abundance and size structure of at least indicator species, will be through evaluation of the impacts of the gear at the present time and using this to forecast likely trends. Such an approach will, however, be characterised by high levels of uncertainty.

Uncertainty and the Precautionary Approach

Estimates of the status of stocks and forecasts of their future trajectories under a given management regime are notorious sources of uncertainty and, directly or indirectly, explain many of the problems encountered in achieving sustainable fisheries.[39] The amount of uncertainty in any given assessment will be related to the quality of information and data available and should be expressed in the form of e.g. confidence limits around any variable estimates. The better the estimate the narrower the confidence limits. However, the question remains as to how to use the estimated uncertainty in arriving at management decisions.

The precautionary approach has been applied and developed in fisheries management as a guide to how to deal with uncertainty.[40] In essence, the precautionary approach can be summarised as requiring greater caution as uncertainty increases. Put another way, the more uncertainty that exists in an assessment of the status of a stock, the lower the target fishing mortality should be set in relation to the level that could be achieved if there was perfect knowledge on the status.[41] However, an operational strategy for applying the precautionary approach has yet to be developed and there is no clarity on exactly how to define uncertainty and no quantification of precaution. The application of the precautionary approach in practice therefore remains very subjective. Nevertheless, it has a critical role to play in an ecolabelling scheme, and effective means of relating uncertainty, related to the quality of the data and assessments of the status and dynamics of stocks, and a responsible level of fishing mortality will need to be applied in each case.

Consultation and Joint Decision-making

This was dealt with earlier in the section under An Appropriate Institutional Framework.

Selection of Management Measures

The management measures represent the only tools that the fisheries managers have to regulate the effect of the fishery on the target species and the ecosystem. Management measures can cover aspects such as the maximum allowable fishing effort or catch on a stock, vessel and fishing gear characteristics, closed seasons and closed areas. The Code of Conduct calls for management measures that:

1. Avoid excess capacity;

2. Provide for economic conditions which promote responsible fisheries;

3. Take into account the interests of fishers;

4. Conserve and protect biodiversity and ecosystems;

5. Allow recovery of depleted stocks;

6. Avoid adverse environmental effects and correct them where appropriate;

7. Minimise pollution, waste, discards, and catches by lost or abandoned gear, resulting in the use of selective, environmentally safe and cost-effective fishing gear and techniques.[42]

All of these, or at least those reflecting environmental concerns, should be incorporated in ecolabelling criteria for fisheries.

Implementation of Management Measures

Of course, no matter how good the management plan and how carefully selected are the management measures, they will not achieve the objectives for the fishery unless they are applied in practice. Hence compliance, backed-up by appropriate enforcement, is critical for sustainable fishing and for the award of an ecolabel. Compliance should, in large measure, follow-on from good institutional frameworks as discussed above. Nevertheless, compliance needs to be monitored and, where necessary, coerced through enforcement. The existence of a monitoring, control and surveillance (MCS) system appropriate to the nature and scale of the fishery should therefore be seen as an essential pre-requisite for award of an ecolabel.

3.6 Experience with Ecolabels[43]

As pointed out by the CEC (1999),[44] there are three possible outcomes to the introduction of an ecolabelled product (p.3):

1. Market Standard: Ecolabel is widely accepted and becomes standard in the marketplace. Labelling is the “price of entry” for the competition.

2. Market Niche: Ecolabel is viable, but not as widely accepted. A profitable market niche for labelled goods develops.

3. Failure: Ecolabel is not accepted by consumers and fails.

Consumer acceptance of the ecolabels will to some extent determine which of these outcomes occur. Availability of supply of ecolabelled product will also be an important determining factor.

Recent surveys have shown that many consumers are likely to choose one brand or product over another if they believe that it will help the environment. Jha (1993) quotes survey evidence which suggests that slightly over half of the consumers in North America had purchased a product that they felt was better for the environment, boycotted a specific product that they felt was bad for the environment, or boycotted products made by a company that they felt was damaging the environment. In addition, consumers in developed nations are more likely to react favourably to companies that are thought to be responsive to environmental concerns (Chase and Smith 1992; Bremmer 1989; Kirkpatrick 1990; Weber 1990). In a study of the market feasibility of Mexican shade-grown coffee, the CEC found that, on average, one in five customers in Canada, Mexico and the U.S. were “very interested” in purchasing Mexican shade-grown coffee (CEC 1999a). However, there was reluctance among consumers to commit to paying more for shade-grown coffee. Paying US$1 more per pound for shade-grown coffee would reduce consumer interest by approximately 50% in Mexico City and by almost 75% in the U.S. Fewer than 10% of consumers surveyed in the U.S. and Mexico were willing to pay US$2 more per pound for shade-grown coffee.

The success of a label may be higher if the focus on the labels is on the direct health implications of the product, as is borne out in a study by the CEC (1999a) on shade-grown coffee. The data collected in North America for that study indicated that consumers were more receptive to paying a price premium if the advertising for the product focuses on human health and taste benefits over the environmental advantages.

Wright (1998) reports on the gulf between what U.S. consumers tell pollsters they will do (pay premium prices for greener goods) and what they do in practice. This calls into question the results of a recent consumer survey in the U.S., where the majority of consumers surveyed indicated they would buy ecolabelled salmon, cod and shrimp over non-labelled, even if prices of labelled products are somewhat higher (Wessells, Johnston, Donath, 1999). The number who actually will pay more for ecolabelled seafood is likely to be less.

Cude (1993) concludes that restoring consumer confidence in environmental claims is a necessary ingredient to allow consumers’ purchase decision to reflect their environmental concerns. Several U.S. studies point to an increased scepticism by consumers regarding environmental claims on products. For example, Mayer, Scammon and Zick (1992) report that 55% of their sample agreed that “a lot of the brands that claim to be better for the environment are no better for the environment than brands that do not make such claims,” and that environmental claims are not well understood.

According to the OECD, there is some scattered anecdotal evidence among OECD nations that sales of a particular product increased when an ecolabel has been obtained (OECD, 1997). Ecolabelling programmes in OECD countries are more successful in countries where its consumers had a high level of environmental awareness. However, there is no statistical data providing quantitative evidence of the actual market penetration of green labels, nor the average market power that an ecolabel is likely to confer on a product (OECD, 1998).

Box 9. Shade Coffee

One of the current work programmes of the CEC is to promote green marketing. Toward this goal, the CEC investigated the market possibilities of shade grown coffee, as a product that Mexico might export.

Shade grown coffee has several environmental benefits:

  • Maintenance of forest cover resulting in reduced erosion of mountain sides and watershed conservation
  • Trees sequester carbon and produce oxygen
  • Trees provide a habitat for bird species (both residential and migratory) and coffee plots shelter numerous species of mammals, reptiles and flora
  • Shade coffee areas serve to conserve biological diversity

The term “shade grown” is open to interpretation, as the degree of shade, and hence the amount of forest cover maintained, can be flexible. Producers of shard coffee will most likely seek some form of standardised criteria for certification of what constitutes true shade-grown coffee, as they will be the one who will benefit directly from being able to charge a price premium for the certified product.

On a social and economic level, shade coffee production is feasible for small landholders and their families, who cannot afford the high volume of chemical inputs and hybrid seeds necessary for full-sun coffee production. By maintaining the forest cover, these small producers may also harvest other forest products, such as medicinal plants, fruits and firewood to supplement their incomes and provide for their survival needs.

According to market research, there is no consumer demand, at present, for certified shade-grown coffee, and the benefits of certification are unknown to the majority of consumers. The demand for certification is far more likely to originate with importers and roasters. Certification of shade coffee will require some form of chain of custody monitoring. This may be accomplished in one of two different ways, costs of certification are borne by the producers, or costs of certification are borne by the roaster. In the case of Mexican shade coffee producers, the second approach is favoured, as they tend not to have the capital necessary to pay for an audit of their product. Although the costs of certification may be recouped through price premiums, the initial capital outlay is beyond the means of most small producers.

Among roasters there is often a reluctance to pay any type of license fee for the use of a certification label. In much of North America, the degree of consumer awareness of what such labels mean is low, reducing or negating consumers’ desire to pay a premium for the shade product. This means that the roasters must promote the product themselves, a costly undertaking, in addition to having to pay the certification fee. This situation explains the lack of participation of most large- and medium-scale roasters in shade coffee certification efforts in North America.

Source: CEC 1999a, 1999b

There is some evidence world-wide that many ecolabels have a large recognition factor. For example, in a 1988 survey of 7,500 German households, 79% were familiar with the Blue Angel ecolabel (U.S. EPA, 1993). A June 1992 survey of Canadians found that 42% of consumers recognised Canada’s EcoLogo. In contrast, only 22% of the Japanese public polled were aware of Japan’s EcoMark in July 1990 (U.S. EPA. 1993).

Organic food sales have grown an average of 24% annually in the U.S., with an estimated retail market share of 1% - 1.5% (Raterman, 1997). In Denmark, market share has grown to 3 - 4% of the retail market (Michelsen). Organic food market shares are even lower in France, Canada, Japan, and Australia (Thompson, 1998). There is significantly more market data available on consumption of organic foods than consumption of ecolabelled forest or marine products. Many studies of organic food markets in the U.S. focus on characteristics of organic food shoppers as opposed to, for example, determining price elasticities of demand for organic produce. Within the U.S., consumers of organic produce tend to be: 1) higher income families; 2) affected by the choice of stores at which they shop; 3) older than 40 years of age; and, 5) have attained higher levels of education (Thompson, 1998).

The U.S. is the largest single-country market for organic foods, with US$4.2 billion in sales for 1997 (Scott, 1998). The main markets for U.S. organic products include high-income countries in northern Europe, Canada, Australia, and Japan (Lohr, 1998). The organic food market in the EU is estimated to be worth US$4.5 billion. Germany (US$1.6 billion), France (US$508 million) and the U.K. (US$445 million) have the largest organic retail sales (Lohr, 1998). Consumer commitment to organic products is strong throughout the EU, with 20% to 38% regularly or occasionally purchasing organic foods. Retail price premiums in Europe average from 10% to 50% above conventional products.

[14] This section contains material from Deere (1999).
[15] See OECD. 1991. Environmental Labelling in OECD Countries, OECD Report 12, written by James Salzman, OECD: Paris & Karen West. 1995. Eco-labels: The Industrialisation of Environmental Standards, The Ecologist, Volume 25, No. 1. See also Erika Preiss. 1997. An Eco-label for Shrimp: Minimizing Potential Trade Barriers, mimeograph prepared for International Environmental Law Clinic at NYU School of Law.
[16] See Elliot B. Staffin. 1996. “Trade Barrier or Trade Boon? A Critical Evaluation of Environmental Labelling and its Role in the ‘Greening’ of World Trade”, Columbia Journal of International Environmental Law, Volume 21, No. 2, p221.
[17] EDF. 1997. Global Deforestation, Timber and the Struggle for Sustainability: Making the Label Stick, EDF: Washington, D.C.
[18] WTO. 1997. Eco-labelling: Overview of Current Work in Various International Fora, Note by the WTO Committee on Trade and Environment, WT/CTE/W/45, WTO: Geneva; OECD. 1997a. Processes and Production Methods (PPMs): Conceptual Framework and Considerations on use of PPM-based Trade Measures, OECD, Paris; OECD. 1997b. Eco-labelling: Actual Effects of Selected Programmes, OECD, Paris.
[19] Germany became the first country with a government-sponsored ecolabelling programme when it began its Blue Angel label in 1977. The Blue Angel has appeared on products ranging from recyclable paper to detergents, vacuum cleaners and oil and gas heating appliances.
[20] Cathy Roheim Wessells wrote this section.
[21] Cathy Roheim Wessells wrote this section.
[22] Cathy Roheim Wessells wrote this section except for Box 5.
[23] In July 2001, MSC initiated a study to investigate the potential for ecolabelling of aquaculture products.
[24] This section contains material from Cochrane and Willmann (2000).
[25] FAO. 1998. Report of the technical consultation on the feasibility of developing non-discriminatory technical guidelines for eco-labelling of products from marine capture fisheries. Rome, Italy, 21-23 October 1998. FAO Fisheries Report 594. 29pp.
[26] Marine Stewardship Council. 1998. Principles and criteria for sustainable fishing. Airlie House Draft. Issue 1, October 1998.
[27] National Fisheries Institute. 2000. U.S. Fisheries Industry Principles for Responsible Fisheries.
[28] FAO. 1998. Op. cit.
[29] Cochrane, K.L. 2000. Reconciling sustainability, economic efficiency and equity in fisheries: the one that got away? Fish and Fisheries 2000;1.
[30] FAO. 1998. Op. cit.
[31] FAO. 1998. Op. cit.
[32] National Fisheries Institute. 2000 Op. cit.
[33] OECD. 1997c. Towards sustainable fisheries. Economic aspects of the management of living marine resources. Paris. p123.
[34] Noble, B.F. 2000. Institutional criteria for co-management. Marine Policy 24:69-77
[35] OECD. 1997c. Op. cit. p124.
[36] FAO. 1995a. Code of Conduct for Responsible Fisheries. FAO, Rome. 41pp. Paragraph 6.4
[37] FAO. 1998. Op. Cit. p. 3
[38] FAO. 1995a. Op. cit. Paragraph 7.5.3.
[39] Cochrane, K.L. 2000. Op. cit.
[40] FAO. 1995b. Precautionary approach to fisheries: Part 1: Guidelines on the precautionary approach to capture fisheries and species introductions. FAO Fisheries Technical Paper 350(1):51p.
[41] Cochrane K.L. 1999. Complexity in fisheries and limitations in the increasing complexity of fisheries management. ICES Journal of Marine Science 56.
[42] FAO. 1995. Op. cit. Paragraph 7.2.2.
[43] This section was primarily written by Cathy Roheim Wessells.
[44] The Commission for Environmental Cooperation (CEC) was established by the North American Agreement on Environmental Cooperation (NAAEC) between Mexico, the United States and Canada in 1993. This agreement is the so-called “environmental side- agreement” to the North American Free Trade Agreement (NAFTA). The CEC has as its mandate to avoid trade disputes arising from environmental concerns and to evaluate the environmental impacts of NAFTA.

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