Yeah, I’ll Happily Pay €15 for a Pound of Beef

I’m on the verge of deciding to start paying more for products than supermarkets, airliners and retailers are asking for their products. I’m sick and tired of them not telling me what their products really cost. This may sound weird but hear me out.

Yesterday I attended a workshop on the topic of sustainable food and energy saving. A statement we discussed was “consumers will never pay a premium for sustainable food” and many attendees said they believed sustainable food should not induce a price premium. They fundamentally believed charging more for sustainability is wrong.

This is an interesting debate. When looking at the true cost of products, it is about much more than the manufacturing costs, costs for overhead and others costs you would find on a typical profit-and-loss sheet. When you factor in air pollution, deforestation, waste collection and many other externalities, the true cost will be much higher. Taking into account true cost is not happening in many sectors. 6 free range or organic eggs are much more expensive than 6 battery farm eggs, even though factoring in externalities would definitely compensate for this.

In a way I agree with not charging more for sustainability. On the flip side though I think we should start charging much more for unsustainable products.

Attending the workshop which was organized by THNK were CSR officers from Ahold (Stop & Shop, Albert Heijn), KLM, ING, Shell and IKEA and I found some of their beliefs striking as they are the ones partly responsible for what price we as consumers end up paying.

Later that day I was reminded of an article I read on HBR titled Companies Must Account for the True Cost of Their Products. Somewhere half-way the article:

It’s easy to understand why the business community is forever working overtime to reject this full-cost accounting and create ever more imaginative arguments against paying for externalities. According to a recent United Nations study, if the world’s biggest companies actually had to pay for the environmental harm they cause, the bill would come to $2.2 trillion a year and reduce profits by one-third.

The article is part of a debate on HBR from 2010 titled What Business Owed the World and it provides a wealth of insights, arguments and discussions on the topic of externalities, true costs and sustainability in the context of business.

I believe that if offered the choice between two more or less comparable products consumers will always choose the unsustainable over the sustainable one if it is the cheapest alternative. For a comparable flight from Amsterdam to Milan, people will not pay €200 instead of €100 solely based on the fact the more expensive option will not harm the environment. Taking this argument further, there are three options as far as I can see:

  • Leaving the customer no choice be simply not offering the unsustainable product – some companies such as Marqt (‘organic’ supermarket in Holland) do this but the majority doesn’t
  • All companies themselves and voluntarily taking into account the true cost of their products when pricing them for consumers – referring to the above it is safe to say this is not going to happen any time soon
  • Policy makers forcing business’ to pay for the true cost of their products (which will then in turn find its way to consumer prices) – I don’t see any signs this is happening in any but a few sectors

In the debate on HBR, especially in the article titled Embracing Externalities is the Road to Hell one can read a lot of information that helped me make up my mind about this.

I believe neither of the three options above will be happening on a large-scale anytime soon. This is quite pessimistic or so it may seem.

I think I’m going to have to take matters into my owns hand and take into account the true cost of the products I’m purchasing myself. Paying €15,= for a pound of beef is no fun, so my guess is, I’ll eat less of it as a result (this is in fact already happening, as I’m doing most of my groceries at Marqt, where a pound of beef is priced at around €15). Paying €300 for a return ticket to Italy instead of only €90? I’ll think twice about that. Paying €4 for a plastic bag at the supermarket instead of €0.35? No way.

I’m not sure what to do with the difference between the (self made up) true cost of anything I purchase and the market price (which is what I really end up paying). I’m sure as hell not going to give it to guys that I’m purchasing the products from. Should I put it into a savings account? Donate it to WWF? Give it to homeless people? Suggestions welcome. I’m also not sure if this helps at all. I’m also not sure how to end up at the true price I should ‘pay’. Suggestions here are also welcome.