True Pricing: producing sustainably at a fair price

Healthy eating and the impact of food production are increasingly important topics for consumers. People want to know what they are eating and want to understand the impact on their bodies and on the planet.
This is also reflected in figures from the Rabobank: over the past five years, sales of organic food in the Netherlands have increased by an average of 10% per year, while the food market as a whole grew only 1% per year.

The business world is starting to respond better to the need for more information about the origin of food products and the method of production. For example, Nature and More labels its fruits and vegetables with a code, allowing consumers to trace the origin and meet organic growers virtually. This company also introduced the sustainability flower, to make all aspects of sustainability transparent to consumers, retailers and growers.

What sustainable manufacturing has to do with True Pricing

Sustainable production is more expensive, however, and that is still holding back mass adaptation. At least, if you look at supermarket prices. This is where True Pricing comes in.

True Pricing is all about giving a complete picture of costs. Not only all visible costs, but also the hidden costs of production are identified. With hidden costs you can think of:

• Costs for water purification required by wastewater discharge
• Medical costs incurred by air pollution or other environmental damage
• Costs for raising dikes required because water levels are rising due to climate change

Hidden costs are passed on to society. So indirectly, consumers do pay for them through taxes or perceived damages.
This video makes it very clear:

True Pricing makes all costs transparent, helping consumers make more informed choices. But making all costs transparent is not that simple. It often concerns long-term effects that are difficult to attribute to a specific activity of a company. What is the impact of that one farm or factory on soil and water quality? How do you measure that within a complex environment where many other factors also influence? And how do you put a price tag on that specific impact?

True Cost flower

Importer of organic fruits and vegetables Eosta commissioned Soil & More Impacts and EY (formerly: Ernst & Young) to make the benefits of organic production financially visible with the True Cost Flower. The dashboard provides policy makers with a tool to tax more harmful production methods and reward sustainable ones. This makes it clear that organic is not so much expensive. On the contrary, conventional production methods are too cheap because the hidden costs are not included in the price.

Idealism or economy

In the future, banks, investors, pension funds and institutional investors will not only evaluate companies based on their financial performance, but will also look at their impact on nature and society.
More and more politicians realize that organic production can save a lot of public spending. In Sweden, the tax on fertilizer has even been raised to 20% to discourage use and prevent soil pollution.
In the Netherlands, 25% of the Dutch groundwater is contaminated by agricultural chemicals, so here too the need to produce differently is great.

True Pricing in Limburg

Province of Limburg has recently started a project with Soil & More Impacts and five companies to test True Pricing in Limburg. The approach is to determine a 'fair' price of food and to investigate whether the user appreciates the added value of a sustainably produced Limburg product. On June 4, five ambitious entrepreneurs discussed their business and social contribution. They are People's Farm (Maasbree), fruit and hop grower Roger Wouters (Reijmerstok), fruit grower Lion Kniest (Baarlo), bioteler Bioverbeek (Velden) and dairy farm Guido van Hoven (Eckelrade). These leaders not only supply food, they also indirectly provide services for the landscape and society. In doing so, they have an impact on soil fertility, soil water management, CO2 storage and biodiversity in the surrounding area. However, for the consumer this is not yet visible and therefore cannot yet appreciate the distinction from other companies.

Farmers and citizens benefit when the hidden costs of producing food become clear. The farmer can better explain his price and gets a fairer price. The citizen gets more transparent information and consciously contributes to the preservation of his environment and his health.

Thinking and acting differently

It is very complex to measure all relationships and express them in costs. Soil & More Impacts is an organization that has experience with this and tries to raise awareness. Niels Dijkman of Soil & More Impacts: "The method is still in its infancy and will not immediately be able to express all things in terms of money. With each project we come one step closer. In addition, it involves a different way of thinking and acting. Farmers can ask themselves: what services do I provide to society and who is willing to pay for them? And what can we do better? We want to give citizens better information, so they can make more conscious choices and are more willing to pay a fair price."

Dairy farmer Guido van Hoven hopes to initiate the transition in this respect: "For the continuity of our sector we need to start working more sustainably. There are many gradations between conventional and organic; it can be done step by step. If it works for us, we can give other companies the confidence that change can be profitable. That way we can grow the sector and introduce new entrepreneurship."

Fruit and hop grower Roger Wouters mentions three reasons for taking part in the Limburg True Cost Accounting initiative: "First of all, it gives insight into the true cost price if you produce sustainably in all respects. Secondly, during the process you also discover where you stand as a company: how sustainable are we already working and where do we want to go? And the third reason: it is a good tool for discussing price with the buyer. This last point in particular will be the challenge: to make the customer aware of the real costs and find them willing to pay the real price. This discussion is already quite different for hops, because we are talking one-on-one with a buyer who already prioritizes sustainability. With fruit, there is still a way to go."

Discussion about price

In September, Soil and More Impacts will present fair price calculations for vegetables, fruit and milk from Limburg. The Province of Limburg is one of the first provinces to get started with this. Commissioner Hubert Mackus of Agriculture wants to explain the importance of this in The Hague and Brussels. Mackus: "We must all have a discussion about price, only then can we really make progress."
Kiempunt will of course keep you informed of the results.

Sources: True Cost Accounting Limburg, Eosta / Sustainable Business / Province of Limburg
Picture material: Eosta