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What are true costs?

What are true costs of products, how are they calculated and what goal do they have?

Daan van Hal avatar
Written by Daan van Hal
Updated over a week ago

True costs: sales + impact costs

The true costs of a product are the sum of its economic costs (the sales price) and its external ecological costs (eco costs). See the figure below.

These ecological costs, in Pickler we call them eco costs, reflect the costs we'd have to pay to prevent a product's damage to the environment. Naturally, the lower these eco costs are, the better!

Eco costs are calculated by multiplying predefined scientific monetary values (€) with impact results (multiple categories, including CO2-eq), calculated by a Life Cycle Assessment method.

Read more about eco costs and how they're calculated here.

What about social costs?

Note that the true costs do not (yet) include external social-economical costs such as child labor and poverty. This is a work in progress.

What are the opportunities of having true costs?

In the future, the eco costs will become internal costs as a consequence of governmental regulations (Eco-tax, Tradable Emission Rights, Best Available Technology etc.). The question is not if, but when.

True costs create new business opportunities for companies that can produce products with lower environmental costs, as they could charge a premium price for their products.

Moreover, it can also help companies reduce their environmental risks and be compliant with sustainability regulations and stakeholders' expectations. This significantly improves the reputation of the company and its brand.

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