Circular economy innovation and the product labelling

3.1 Circular economy innovation

The transition to a circular economy requires innovations in the way industries produce, consumers use and policy makers legislate [13]. Circular economy is intrinsically bound to eco-innovations in the way societies legislate, produce, and consume [14] and these can be defined as “the production, application or exploitation of a good, service, production process, organizational structure, or management or business method that is novel to the firm or user and which results, throughout its life cycle, in a reduction of environmental risk, pollution and the negative impacts of resource use (including energy use) compared to relevant alternatives” [15].

Innovation in a company generally refers to changing or creating more effective processes and products, and can increase the probability of a business succeeding. Companies need eco-innovations in order to be competitive, to comply with the legal requirements, to meet the customers demand for sustainable products, etc.

All over the world, the need for greater sustainability presents opportunities for innovators by rewarding a competitive edge to those adopting more sustainable practices and to those offering more sustainable products to their customers [16]. The eco-innovations range from stepwise improvement of an existing design or process to entirely new business models and concern any conceivable forms of innovation. According to V. Prieto‐Sandoval, C. Jaca and M. Ormaza [13], eight types of such eco-innovations can be identified:

• Business model innovations,
• Network innovations – collaborating with other companies,
• Organizational structure innovations,
• Process innovations – the way of making products,
• Product innovations – the quality and functionality of the products,
• Service innovations,
• Market innovations – communication channels with the customer, brand values, product positioning,
• Customer engagement innovations – focus on customer experiences, and meeting their needs.

The transition to a circular economy can certainly be facilitated by eco-innovation, in all its imaginable forms, including innovation of product labelling.

3.2 Innovation in product labelling

The increasing demand for improved product safety and sustainability led to significant innovation in PL. Innovative labels are able to monitor temperature and quality, to offer product safety assurance, to prevent counterfeit, and many more. Used in conjunction with technologies such as Internet of Things, Cloud Computing, and Mobile technologies, these labels can provide track and trace capabilities and help locating products as they move through the supply chain.

Good traceability allows a better control of the product quality and the product lifetime along the whole supply chain. For example, the temperature-sensing labels ensure that products such as vaccines, pharmaceutical products or perishable foods have been stored at the required temperature and remain safe to use. They offer continuous monitoring and record the highest temperature reached by the product. The most used technologies for traceability are the RFID (Radio Frequency Identification), the NFC (Near Field Communication) and the QR codes.

Fighting counterfeiting in various markets is more efficient thanks to PL innovation. For example, BASF developed a new technology that incorporates a special water mark into the product label that is invisible indoors but clearly visible in sunlight, thus helping customers and retailers to identify genuine products. Product labels combining QR code with additional information printed with an invisible photochromatic ink are also used for counterfeit prevention and brand protection in various industries.

Augmented Reality (AR) labels can dramatically improve the user experience and give manufacturers new ways to engage with customers. When viewers point their smartphone camera at the product’s label, they can unlock a whole new world of interaction and animation, including videos, 2D/3D content, social media sharing options, etc.

The sustainability is an important aspect for the innovation in product labelling and most of the technological advances provide also improvements related to the environment. These improvements deal with materials, practices and design ideas.

Source: www.bodyscience.com.au

3.3 Smart label technology

Smart labels are product labels that incorporates technology, such as RFID tags, QR codes, near field communication (NFC), etc.  that extends their functionality and contents beyond traditional print methods. They rely on an interaction with a consumer device (e.g., smartphone) to facilitate an interaction. A simple example is a product label imprinted with a QR code that can be scanned by a mobile device and be linked to a web page or prompt an application download.

Smart labels can have different properties and functions, from a simple barcode readable by a smartphone that allows consumer to access additional information to a visible colour change that indicates modifications in the product surroundings. There are several main types of smart label:

• Electronic Article Surveillance (EAS) – do not contain data and are used for theft detection in shops and libraries,
• Near Field Communication (NFC) Tags – contain data and are used for contactless exchange of data over short distances,
• Radio Frequency Identification (RFID) – transmits digital data when interrogated from a nearby RFID reader device and are used in countless applications (e.g., product identification and tracking, speeding up the checkout process in shops and theft prevention),
• Smart labels for brand enhancement – used to add useful or attractive features to a product or its packaging,
• Sensing labels – used to detect events such as overheating, shock, tilt, vibration, etc.

Many times, one smart label can perform two or more functions, for example RFID and temperature sensing.

Advanced technologies, such as Internet of Things, Augmented Reality and Blockchain, are used to make product labels even smarter. For example, Bumble Bee allows its customers to trace their seafood and verify it has been sustainably caught thanks to a smart label powered by blockchain technology [17]. In other applications, NFC-enabled labels can detect and tell consumers whether a container has been opened or not. As already discussed, AR apps triggered by the product label offers new ways for customer engagement and improving user experience.

Source: www.ift.org/

3.4 Sustainability labelling

Sustainable development meets the needs of the present without compromising the ability of future generations to meet their own needs [18]. Sustainability is a holistic approach based on three pillars, which must be considered together to find lasting prosperity:

• social – aims to improve social equality,
• economic – aims to ensure a business remains profitable throughout its operation,
• environmental – aims to improve human welfare through the protection of natural capital.

Over the last decades, companies have increasingly adopted sustainability standards as instruments to demonstrate their commitment to sustainable practices and to communicate this to the customers, through product labelling.

Sustainability standards and certifications are voluntary guidelines used to ensure that a product is produced, processed, transported or sold in accordance with certain sustainability criteria, such as worker health and safety measures, soil conservation and minimum price paid to farmers.

There are over 400 sustainability standards all over the world [19] and they cover many products, including agricultural products, textiles, electronic devices, wood and paper products, cosmetics and detergents. These standards can be set by governments, NGOs, and companies or through multistakeholder initiatives.

The implementation sustainability standards and sustainability certification could be difficult and costly for SMEs, including start-ups [20]. But, having a sustainability certification allows SMEs to differentiate from the competition, to increase sales and to thrive in the current market. For some small companies, especially suppliers of large companies, the certification may be mandatory.

In addition, SMEs can include sustainability claims on their product labels. The sustainability claims are messages used to set apart and promote a product with reference to one or more of the three areas of sustainability. However, they should follow some rules and regulations [21].

Product labels can help customers to make more sustainable purchasing decisions, thus being an important instrument for promoting sustainability.

Three Pillars of Sustainability. Source: www.wikimedia.org

3.5 Ecolabels

Ecolabelling is a voluntary method of environmental performance certification and labelling, widely used around the world. An ecolabel identifies products proven to be environmentally preferable within a specific category. Whereas sustainability certifications apply to companies, ecolabels have the same function with respect to products.

Ecolabels, also known as environmental or green labels, are means for a company to show that it is making efforts to reduce its environmental impact. This is communicated to the customer by the presence of the ecolabel logo on a product, as a proof of the product manufacturer compliance to the ecolabel criteria.

Ecolabelling enables the companies to harness consumer demand for environmentally friendly goods. It can also motivate them to improve the environmental performance of their products, this resulting in a reduced environmental impact.

There are a wide range of product labels claiming environmental benefits. The Ecolabel Index includes 455 ecolabels from 199 countries, and 25 industry sectors (in August 2021) [8].

Ecolabels offer companies and start-ups the opportunity to signal to consumers which products are more respectful to the natural environment than their substitutes. They can be a very good marketing tool and can offer a competitive edge.

In the European context, the development of product ecolabelling is part of the Integrated Product Policy approach [22]. EU Ecolabel is a voluntary label identifying products and services that have reduced their environmental impact throughout their entire life cycle [23]. EU Ecolabel criteria encourages manufacturers to design durable and easy to repair and recycle products, to promote innovation and save resources. It can be a great choice for a start-up to use EU Ecolabel criteria for guidance on eco-friendly best practices when developing their products.

SMEs and micro-enterprises planning to apply for EU Ecolabel are supported with information and special discounts [24].  As the EU Ecolabel covers a wide range of product groups, many SMEs can have their products eligible. Applying for a new product group proposal is also possible.

Source: https://ec.europa.eu/environment