Oiconomy Pricing

The Oiconomy Standard

The Oiconomy Price – Disclosing the Hidden Costs of Products

Preventative costs as inclusive measure of sustainability (planet, people and prosperity) of products.

The goal of the Oiconomy standard is to provide a normalized way of measuring and communication of (un)sustainability. In this standard (un)sustainability is expressed in a virtual monetary unit, the “ESCU” (Eco Social Cost Unit). As closely as possible, the ESCU score of a product equals the hidden preventative costs, or externalities, related to a product. These are the costs that should have been spent to avoid any of the damage that the product causes during its entire lifecycle. Added to the standard economical price of the product, the ESCU score represents the total costs of a fully sustainable alternative for the product. Calculating the ESCU’s also provides a normalized means of transfer of data on (un)sustainability through the supply chain, enabling all players in the supply chain to build on each other’s data.

Rationale

A root cause of negative impacts in the life cycle of products is that prevention is often not in the actor’s own short term interest. One could even argue that the current economy gives an advantage to that actor that is best in transferring costs (externalities) to third parties. In an envisioned inherently sustainable economy, the economic actors prevent negative impacts out of their own interest. Our new method prepares for a real price economy, in which the most sustainable product version is also the cheapest and competition automatically focusses on sustainability. Even though products will be more expensive, the totals costs for societies will be far lower, preventing the current forms of damage.

Therefore, we argue that the best measure of sustainability is the preventative cost distance to a sustainable version of the product. The first necessary step is enabling a uniform and aggregable calculation of preventative costs for all aspects of sustainability (planet, people and prosperity) and transfer this information through the value chain, thus calculating a second price, expressed in “Eco Social Cost Units (ESCU’s)” and equal to the currently hidden costs of preventing impact, as it were, an offer for the sustainable version of the product.

Goals of the Oiconomy Project

  1. Uniform and aggregable measurement of the preventative cost distance to sustainability.
  2. Preventative costs are a permanent part of the supplier – customer communication.
  3. Encouraging end-producer companies and their whole value chains to calculate and execute sustainable solutions.
  4. Comprehensive measurement of environmental sustainability and social responsibility.

Developed by:

Dr. Pim Croes
Dr. Walter J.V. Vermeulen

Copernicus Institute of Sustainable Development, Utrecht University, Utrecht, The Netherlands,
Oiconomy Foundation, Giethoorn, The Netherlands