Loyalists hope a new flag representing their links with World War I will replace paramilitary flags in the run-up to the centenary of the Battle of the Somme.
Representatives of the three main loyalist groups, the UDA, UVF and Red Hand Commando, were present at the launch yesterday.
They also announced a wider protocol on flags and bonfires during the marching season.
It says the Union flag and Northern Ireland flag should be flown in a respectful manner and not used for provocative purposes. Flags should also be maintained in good order and come down after three months from June.
The loyalist leaders also appealed for bonfire organisers to ensure the siting of pyres, materials used and anything placed on them have respect for public safety and security of homes and businesses.
It is hoped this will prevent scenes such as last summer when elderly residents had to moved from their homes in east Belfast because of safety concerns at a huge fire built just metres from houses.
The organisations came together last year to form the Loyalist Communities Council (LCC), which aims to put mechanisms in place to allow former paramilitaries to step away from the organisations into civil society.
Tony Blair's former chief of staff Jonathan Powell was instrumental in helping set up the body.
South Belfast loyalist Jackie McDonald stressed the need for the younger generation of loyalists to help make the new protocols work.
"We have been trying to get our message home about a better way forward and better focus and hopefully to move everybody on in a way where we are first class loyalists, not seen somehow as second class unionists - we want our people to be first class loyalists," he said.
Winston Irvine of the PUP said while the Somme flag would not "completely eradicate the use of paramilitary flags", it would limit their use.
"This initiative is designed to ensure we progress the issues around flags.
"We know this is a hotly contested and contentious issue and we believe this is a very positive and constructive step forward in progressing that issue."
Former loyalist prisoner Jim Wilson also said that "loyalism needs to get the monkey off its back and the monkey on its back is the lack of respect sometimes that some of our people show to people who live in those areas".
Secretary of State Theresa Villiers MP said the initiative was a step forward.
"The UK government welcomes this initiative as a step towards flags and emblems being displayed in a manner which demonstrates mutual respect for all parts of the community," she said.
"It is important that everyone engages positively with the new commission on flags and identity when this is established."
Irish Minister for Foreign Affairs Charlie Flanagan also welcomed the announcement.
"The display of flags and emblems in Northern Ireland is highly emotive and can at times be divisive, particularly in a society moving on from conflict," he said,
"I commend the acknowledgement of the need for mutual respect, demonstrated in the development of the protocol, and look forward to these principles being put into practice.
"Discussions on how to build a greater climate of respect for differing traditions in Northern Ireland, and on how to build a shared society, based on parity of esteem, have been at the heart of the Good Friday Agreement and successive Agreements."
