Amazon recently announced a new climate initiative which allows customers to “see the Climate Pledge Friendly label when searching for more than 25,000 products to signify that the products have one or more of 19 different sustainability certifications that help preserve the natural world, such as reducing the carbon footprint of shipments to customers.”
We were pleased to learn of this announcement because we had called for a third-party certified climate label from Amazon about a year ago in Forbes.com. But for the label to become a gamer changer, Amazon needs to make the climate-friendly option visible on its website.
Three Prongs of Decarbonization
How does Amazon’s new initiative fit the big picture on climate action? Think of three pillars of decarbonization: policy change, technological progress, and changing consumer behavior.
A policy change means that governments enact new climate regulations. Consider California’s recent policy mandating that “by 2035, all new cars and passenger trucks sold in California be zero-emission vehicles”. Because California typically accounts for about every eight new car sold in the United States, this regulatory mandate (which other states might follow) could radically transform the US automobile industry.
New technologies to reduce or capture emissions play an important role in addressing climate change. Think of photovoltaic or wind power technologies that are substantially helping decarbonization efforts.
Amazon’s recent initiative focuses on the third prong of decarbonization: changing consumer behavior. As research shows, some consumers want to buy climate-friendly products but do not know how to identify them. Similarly, some firms want to sell climate-friendly products but do not know how to assure consumers about their climate claims. These information failures mean that a market for climate-friendly products does not emerge. Amazon is trying to fix this.
Different Types of Certifications
Certification systems seek to solve information problems. They impose requirements on firms about climate policies. For certification to be credible, outside stakeholders should have information about the stringency of these policies. Because these new requirements increase firms’ costs, at least in the short run, firms want some compensation. For example, they want a way to advertise their climate friendliness to earn goodwill with regulators and opinion leaders, and probably attract new customers. Many certification systems, such as the ones that Amazon is working with, have labels which firms can display. For pro-climate consumers, this is a good thing because these labels allow them to easily identify climate-friendly products.
But consumers may not believe firms’ climate claims. What if firms cheat by not adopting new climate policies that they have promised to follow? Certification bodies anticipate this sort of a credibility problem and require firms to get audited about their climate policies.
There are three types of audits. The most permissive is the first-party certification, which means that firms audit themselves. This obviously has credibility problems. Second-party certification requires firms be audited by industry peers. Third-party certification, which Amazon’s announcement has referenced, means that firms are audited by accredited external auditors – similar to what firms do for their financial and accounting reports.
Even third-party certification is not flawless because firms hire their own auditors. This means that auditors, fearing the loss of business, probably think twice before “failing” a firm. The Enron scandal revealed this problem. Nevertheless, third-party certification remains the gold standard in sustainability labels. There could be a fourth-party certification system where firms neither choose their auditors nor pay for them. But these are rare.
Challenges in Creating a Market for Climate Friendly Products
Companies need a strategy to make sure consumers can easily search for products with climate labels. To check this out, we visited Amazon’s website. A quick glance did not reveal any announcement about the “Climate Pledge Friendly” products. There were announcements about holiday shopping, Amazon prime deals, etc.
We looked at the row just below Amazon’s masthead. Here one can see links to “Best Sellers”, “Today’s Deals”, or “Customer Service”. Again, we did not see a link to “Climate Pledge Friendly” products.
Maybe, Amazon shoppers simply go straight to the “search” function to minimize their shopping time. They type in the product and the search function generates results. If Amazon wanted consumers to spot “Climate Pledge Friendly” products, the search would probably put these products on the top of the list.
Let us give a concrete example. In the search function, we typed in “hard surface cleaners.” The website told us that it was displaying “1-48 of over 2,000 results for “hard surface cleaner”. We looked at the couple that were listed on the top but none of them had the “Climate Pledge Friendly” label.
We wondered if the sort function (top right-hand corner of the webpage) might help in identifying climate-friendly products. Once the search algorithm generates the product list, consumers can sort the products by “Price: Low to High” Price-High to Low”, “Avg. Customer Review,” or “New Arrival”. Unfortunately, we could not sort the listed products by “Climate Pledge Friendly” label.
This raises the question: how does then one find “Climate Pledge Friendly” products? When we typed in “Climate Pledge Friendly” in the search box, it took us to the dedicated page where such products are listed. Amazon probably expects that this is where customers concerned about climate change will shop.
But how will Amazon shoppers learn of this dedicated page? Shoppers access Amazon’s website to buy stuff. They use the search function to look for products. How can one expect that they will change their search process and type in “Climate Pledge Friendly” products instead of searching for the product?
The idea behind the climate label is that consumers could help save the earth, while doing their “normal” shopping. To accomplish this goal, the portal must make information about “Climate Pledge Friendly” products easily available. As of now, it does not.
To conclude, Amazon’s labeling initiative is a good start, but it is very preliminary. Amazon’s online portal does not make the climate option easily searchable. Consequently, Amazon’s new initiative is not likely to have a large impact on climate protection.