The Green Premium

17 02 2011

http://www.hktdc.com/info/web/mi/article.htm?LANGUAGE=en&ARTICLE_ID=1X07BK0C&DATASOURCE=hkthk

16 Feb 2011
The Green Premium

The EU is striving for sustainable growth by promoting a more resource-efficient, greener and compet  
The EU is striving for sustainable growth by promoting a more resource-efficient, greener
and competitive economy
(photo: iStockphoto.com)
 

World leaders may continue to disagree over how to tackle climate change, but European consumers are taking matters into their own hands, increasingly thinking “green” when it comes to buying decisions. 

Even though the global recession has effectively turned European consumers into bargain hunters, they won’t compromise on quality or green elements in their quest for a cheap deal and – manufacturers, take note – they’re increasingly willing to pay a premium for green products. 

This wave of green consumerism (and the lock-step development of green manufacturing) has proven to be recession-proof. It’s also a trend that’s likely to grow as the global economy gets back on track.  

     
  Green Checklist  
     
  Speed in adopting green design and processes, not to mention keeping up with regulations, will soon be vital to business success. With the EU ranked as one of Hong Kong’s top consumer goods’ export markets, it’s increasingly important for Hong Kong companies to keep up with the EU’s evolving green manufacturing trends to stay competitive. 

The recession-resilient nature of green consumerism is a clear signal to manufacturers and retailers to think beyond price and quality.

Apart from adjusting materials, production processes and product design, Hong Kong companies can mount marketing campaigns to educate consumers on how their products are not simply “like-for-like alternatives” for less eco-friendly items. There area number of other tips worth noting as well. 

Stringent Requirements

Given the EU’s goal of promoting sustainable growth, imported products are expected to face increasingly stringent environmental requirements regarding hazardous substances in electronic devices, recycling for electrical and electronics equipment, chemicals, and energy efficient design and standards. 

EU regulators continue to beef up existing laws and come up with new ones, making it essential for Hong Kong exporters to stay alert to existing and prospective green product requirements. 

Affixing Eco-Labels

With the EU keen to boost the use of eco labels, and consumers paying more attention to them, Hong Kong companies should better use green labels to distinguish their offerings and counter the growing scepticism of EU consumers over green product claims. 

Hong Kong manufacturers should consider adopting voluntary labelling programmes like EU Flower and Energy Star, over and above compulsory labelling requirements. 

Sustainable Supply Chains

Following a growing pursuit of more efficient transport and distribution, European buyers are making the transition to a low carbon supply chain.

To cope with higher environmental requirements and the possible imposition of an EU-wide carbon tax, Hong Kong manufacturers should manage and develop a sustainable supply chain. This includes recognising the importance of using environmentally friendly materials, and enhancing product and lifecycle designs by securing a reliable supply of sustainable raw materials.

 
   

A recent Boston Consulting Group survey on consumer sentiment showed that more than 90 per cent of EU consumers have bought environmentally friendly products, while nearly three quarters remain attracted to green items and will continue buying them.  

The study also revealed that 23 per cent of European consumers are more willing to pay a premium for environmentally friendly products (compared to 17 per cent in the United States and nine per cent in Japan). This is up from 21 per cent in the third quarter of 2008, when the global financial crisis was beginning to grip the European economy. 

Prove It!  

The recession-resilient nature of green consumerism is a clear signal to manufacturers and retailers  
The recession-resilient nature of green consumerism is a clear signal to manufacturers and retailers to think beyond price and quality (photo: iStockphoto.com)  

Despite their general desire to adopt sustainability, Europeans are increasingly sceptical of green product claims, shifting the onus on sellers to prove that their green offerings are truly environmentally friendly and worth the price premium. 

Manufacturers can reassure consumers by using widely recognised eco-labels such as EU Flower and Energy Star, which are part of a voluntary labelling programme. 

As to the wider policy impact, the EU is striving for sustainable growth by promoting a more resource-efficient, greener and competitive economy. This year has been key for companies manufacturing, exporting or distributing within the EU, as new mandatory green rules are discussed and agreed on.

These new and often more demanding regulations will have long-range cost implications. Compliance in itself places an extra burden on exporters when it comes to use of materials and production processes, as does refinement of design or the composition of new product design. 

Supplier companies must remain alert to revisions of the Waste Electrical and Electronic Equipment (WEEE) and Restriction of Hazardous Substances (RoHS) directives, as well as ongoing implementation of the REACH regulations on chemicals and their safe use, and adoption of the new Ecodesign Directive. 

Changing Targets  

One of the main changes to the proposed WEEE Directive concerns collection targets. Currently, the target is four kilogrammes per inhabitant per year. While some member states can easily exceed this target, other members, such as Romania, can barely meet a fraction of it. 

The proposed WEEE Directive sets a percentage target, which will take into account the economies of the different member states when it becomes binding in 2016. The need for targets is based on actual waste, because older goods are often stored or given away rather than thrown out.  

The proposed directive’s recovery target promotes the reuse of entire appliances. Under the proposed directive, all WEEE elements will have to be separately collected: between 50 per cent and 75 per cent will need to be sent for treatment or undergo preparation for recycling, while reusable appliances will need to be separated from other electrical or electronic waste and adhere to a five per cent reuse target. For small-sized equipment and lamps, collection targets are expected to be set individually to ensure that these items don’t end up in the general waste stream. 

     
  The Colour of Change

The EU is forging ahead with new and revised regulations over how products are manufactured, exported and distributed. Changes include:

  • Expanding the scope of regulations and clarifying definitions by creating a binding list of products defining the scope of RoHS
  • Creating a list of chemicals to be studied and considered for a future ban
  • Introducing relevant provisions already
    in the EU legislation covering product marketing to ensure conformity in state surveillance and assessment
  • Adopting a procedure for exemptions, such as introducing additional socio-economic criteria for granting exemptions and requiring applicants to evaluate substitutes before submitting a request
  • Bringing medical devices as well as monitoring and control instruments within the scope of RoHS
  • Establishing a mechanism for identifying and restricting the use of additional hazardous substances
 

As for producer responsibilities, the only change concerns the collection of WEEE items. The new provision allows national governments to make producers pay for the entire cost of collection facilities accepting WEEE pieces from private households. Nevertheless, member states are also expected to encourage producers to do this. 

Member states that ask producers to finance collection facility costs also have to ensure that the waste deposited at collection centres is handed over to producers or other suitable establishments free of charge for reuse. 

The latest draft stipulates that retailers have to accept small appliances, such as kettles or electric toothbrushes, from consumers who, under the one-for-one rule, are allowed to return WEEE items to retailers for free when buying a new, equivalent product. 

Hong Kong manufacturers, like others, will have to start acting green to keep in line with their customers’ demands and the new EU regulations. 

For more details, please see the HKTDC Research report: “Green trends in the EU and business implications,” which can be ordered at http://bookshop.hktdc.com/.

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