02/29/2012 01:27 pm ET | Updated Apr 30, 2012

Eco-Labeling: The Critical Questions to Ask

Will we see the day when all products carry environmental labels with data on carbon emissions and other impacts? Recent news tells us a definitive... maybe. Within a couple days of each other, GM announced new eco-labels for some Chevy models, while UK mega-retailer Tesco pulled back from an important 4-year experiment in carbon labeling.

The attempt to give corporate buyers and end consumers more sustainability data about the products they are purchasing has had a somewhat tortured history. The Tesco experience in particular highlights a few big questions about green data labeling.

Tesco has been a leader in sharing carbon footprint information with consumers, having reviewed and labeled over 500 products. The company's efforts came on the heels of Pepsi's first foray into labeling with its Walkers potato chips brand, also in the UK. Since then, however, it has been running up against the most important questions about how to make data labeling work:

Which products "need" it? It makes a lot more sense to put information on a car, which is a purchase people research heavily and one that has a significant impact on a household's carbon emissions. Your potato chips, not so much.

What type of information should be provided (if any)? Is the carbon footprint the most useful data for customers to have? Or total energy use during the product's lifetime? The best thing to share will depend heavily on the product -- the labels on energy hogs like light bulbs, air conditioners and cars should tell us the total energy use and cost to operate over a year or the product's lifetime. For milk or snacks, the energy used to get it to shelves makes sense, but again, may not be helpful for consumers. So even without the specific grams of carbon, a combination of qualitative and quantitative info, like on Chevy's new labels, could still make sense in many cases.

Can you even summarize the sustainability of a product in a label? This is perhaps the toughest question and the literally hundreds of highly varying eco-labels out there attest to the challenges of trying. In some cases, like a car, maybe the concept of "sustainability" is fairly straightforward given how much of the impact comes in the "use phase" of the product -- if you're getting 50 percent better fuel efficiency, you know you're reducing the impact a great deal. But how sustainable is 80 grams of carbon for a bag of chips? Heck if I know.

How much work/cost does it take to research and produce the label? Tesco made it clear that a core reason it's stopping this process is that each product takes "a minimum of several months' work." It's an interesting time to reach that conclusion because the tools for calculating footprints are evolving fast. But, and this is a big caveat, we're a lot closer to knowing the "hot spots" in most product lifecycles (e.g., for detergent, the largest part of the footprint is the washing machine in the home), than we are to knowing the exact grams of carbon per product. That level of sophistication will come with better data and carbon allocation methods (mirroring, I suspect, the cost allocation tools accountants have developed for a century). But isn't directionally correct information good enough in most cases?

Do consumers even care? This is the critical question, but the answer for now may not matter. Did people "care" about nutrition labels when they first came out? Probably not much, and it's unclear if they do now, given how unhealthy Americans are in general. But then, maybe our obesity problems would be worse without the labels.

But what's really interesting about all of this is that the consumer side of the discussion, while getting more media attention, has been less important in actually forcing change. It's in the business-to-business world that the demands for more information on every product have really been rising. From the Sustainability Consortium for retail and consumer products -- which saw its own shakeup recently with the exodus of its Executive Director after only 10 months on the job -- to the Sustainable Apparel Coalition for outdoor gear and clothing, industry groups are coming together to gather data and set standards for measuring footprints.

I am confident that Tesco and other major retailers will continue to ask suppliers for carbon data and other sustainability data when picking products for their shelves and setting up special promotions. The greening of the supply chain is the most dependable of trends in the sustainability sphere because there is so much clear benefit to companies when they know their value-chain footprint, from cost savings to risk reduction to better brand storytelling.

So much of this data-gathering and ranking work will continue unbeknownst to consumers. Given how much power retailers and other B2B customers have to transform products and pre-select better options for consumers, maybe it's actually better this way.

This post first appeared at Harvard Business Online.