NewEnergyNews: TODAY’S STUDY: MADE WITH NEW ENERGY

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  • MONDAY’S STUDY AT NewEnergyNews, August 10:
  • The World’s New Energy Right Now

    Tuesday, May 29, 2012

    TODAY’S STUDY: MADE WITH NEW ENERGY

    Made with Renewable Energy: How and Why Companies are Labeling Consumer Products

    Deborah Baker Brannan, Jenny Heeter, and Lori Bird, March 2012 (National Renewable Energy Laboratory)

    Executive Summary

    Green marketing—a marketing strategy highlighting the environmental attributes of a product—dates back to the 1970s but began to flourish in the early 1990s. More recently, a number of companies using renewable energy in the manufacture of products have begun to communicate renewable energy use directly on product packaging, relying either on a logo or some combination of text and imagery. This report discusses the experience of companies that communicate to consumers that products are “made with renewable energy.” Corporate commitments to using renewable energy, and communicating that commitment on product packaging and through other means, could play an important role in educating consumers about the availability and feasibility of using renewable energy as an alternative energy source.

    Researchers identified nearly 50 companies that communicate renewable energy use on product packaging. Representatives from 20 companies were interviewed and asked to discuss their experiences marketing products produced with renewable energy. Companies take a variety of approaches to communicating to consumers that their products are made with renewable energy. Some companies are labeling on-product, while others are using their websites, social media, and other promotions. On-product labeling can include use of a logo or use of imagery and statements, such as a picture of a wind turbine and note that the product is made with renewable energy.

    Why are companies promoting the use of renewable energy on products? The primary motivation identified was to communicate to the consumer about the company’s commitment to renewable energy and, in doing so, enhance the image of the brand. Other motivations included differentiating a product, targeting environmentally conscious consumers, and to a lesser degree, following an existing industry trend and earning a price premium.

    What challenges do companies face when making on-product claims about renewable energy? One of the primary challenges identified was the limited and competing uses of physical space on a product (“product real estate”). Other challenges included determining the appropriate language and content to include and knowing whether consumers will recognize and understand renewable energy messages. Costs associated with modifying packaging, costs of certification and program requirements for use of a third-party logo, and international product marketing were identified as minor challenges.

    The future growth rate of this new market for labeling products with renewable energy claims remains to be seen. While some lessons can be learned from how eco-products have been marketed historically, products that are made with renewable energy are unique in that they are identical to the comparable conventional product in quality and performance; only the energy used to manufacture the product is different.

    Introduction

    Green marketing—a marketing strategy highlighting the environmental attributes of a product, often through the use of labels or logos—dates back to the 1970s. It did not proliferate until the 1990s (Rex and Baumann 2007), however, when extensive market research identified a rapidly growing group of consumers with a heightened concern for the environment. Consumers expressed not only a preference for green products but also a willingness to pay a premium for such products (Peattie and Crane 2005). The response was a surge in green marketing that lasted through the early 1990s. By the mid-1990s, however, the green marketing rush had waned. The market for green products had remained relatively weak due to the apparent gap between environmental concern and sales suggested by consumer surveys to actual sales achieved (Rex and Baumann 2007; Peattie and Crane 2005).

    Although green products remain a niche market, more than 80% of consumers continue to express interest in protecting the environment, even though those levels have declined slightly in recent years (Natural Marketing Institute 2011). As such, companies continue to pursue new ways of communicating their actions to protect the environment to consumers.

    Providing information on the type of energy used to produce a product—specifically whether it is made with renewable energy—is an emerging strategy. Survey data suggest that consumers view renewable energy favorably and prefer products made with renewable energy sources. Surveys conducted by the Natural Marketing Institute, for example, found that 80% of consumers in 2010 indicated that they care about the use of renewable energy (Natural Marketing Institute 2011). Additionally, a recent poll conducted by Vestas and TNS Gallup found that 65% of consumers worldwide prefer products that are made with wind energy (Vestas and TNS Gallup 2011).

    A number of companies using renewable energy in the manufacture of products communicate this directly on product packaging, relying either on a logo or on some combination of text and imagery (e.g., wind turbines). Other companies have refrained from using on-product messaging and rely on other types of marketing collateral to communicate their use of renewable energy, typically via their websites. In general, communicating the renewable energy content of products differs from some earlier green marketing efforts that often focused on modifications made to the products themselves. One reason the adoption of green products has been limited is because green products often do not compete with comparable conventional products on important dimensions, such as price, quality, or performance (Gallastegui 2002). Products that use less material or recycled material, for example, could be viewed as inferior or less effective. In contrast, the use of renewable energy in the manufacture of a product has no impact on the quality of the product itself. Therefore, previous experience with green marketing might not be entirely transferable to this new strategy of communicating the renewable energy used in manufacturing a product.

    This report discusses the experience of companies that communicate to consumers that products are “made with renewable energy.” Representatives from 20 companies were interviewed and asked to discuss their experiences marketing products produced using renewable energy. Interview participants were asked to discuss motivations for making on-product claims and to describe their primary challenges in labeling products with renewable energy use. The small number of interviews would not have provided robust quantitative data; therefore, interviews focused on gathering qualitative responses. The first half of this report provides an overview of the type of companies that have labeled products or advertised them as being made with renewable energy. It also highlights the avenues companies use to describe their use of renewable energy. What follows is a discussion of the motivations for making on-product claims about the use of renewable energy and the challenges in doing so, based on insights learned through the interview process.

    Conclusion

    Marketers have highlighted a variety of environmental attributes of products for several decades, but specifying the type of energy used to manufacture a product is a trend that has only emerged in the past decade. In the United States, the number of companies marketing products as “made with renewable energy” has increased substantially in the past several years, although the market remains small. In 2011, researchers identified about 50 companies that use renewable energy labeling on products. Through interviews with 20 companies with experience labeling products as “made with renewable energy,” we have found the following: (1) the companies range in size, (2) some companies are in the business-to-business sector and many others are in the business-to-consumer sector, (3) companies span a wide array of industries, and (4) companies vary in terms of the scope of their labeling efforts, with some labeling a specific product and others labeling a product line or all company product lines.

    Motivations for labeling products differ. Some companies are motivated by the ability to differentiate a product through using a “made with renewable energy” message, appealing to the environmentally conscious consumer. Other companies reported that the primary motivations were to confirm an already existing commitment to sustainability or to enhance the image of a brand. None of the companies interviewed attempted to earn a price premium on the product because of the use of renewable energy in its manufacture.

    Methods of communicating the use of renewable energy vary. Some organizations have relied on logos or imagery to convey the use of renewable energy in the manufacture of a product and others have included text on the product packing. Others have complemented this by providing information on websites about their renewable energy purchases and the associated benefits, and some have used social media and other promotions to convey their use of renewable energy.

    There are numerous challenges associated with communicating the use of renewable energy directly on products, including the limited real estate available on product packaging and determining the appropriate content to include. Another challenge is the difficulty in assessing how effective “made with renewable energy” claims are in increasing product sales. Further, there often is uncertainty as to whether the customer recognizes the logo used and understands the information being conveyed. Lessons from earlier green-marketing experience indicate that a label or logo that is recognizable, easy to understand, and trusted is more effective at conveying information to the consumer—as a result, they contribute to market growth (Rex and Baumann 2007). The limited experience with renewable energy logos, however, makes it difficult to adequately gauge recognition and understanding.

    A multi-attribute label is something that could address multiple environmental attributes, not just use of renewable energy. Interviewed companies highlighted that a multi-attribute label could address concerns about limited packaging real estate and simplify the certification process on the company end.

    Some lessons can be learned from how eco-products have been marketed; however, products that are made with renewable energy are unique in that they are identical to the comparable conventional product in quality and performance; only the energy used to manufacture the product is different. Given this new market, it remains to be seen the extent to which products “made with renewable energy” will be utilized and support the use of renewable energy. Corporate commitments to using renewable energy and communicating that commitment on product packaging and through other means could play an important role in educating customers about the availability and feasibility of using renewable energy as an alternative energy source.

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