Oiconomy Pricing – Disclosing Real Prices
is a fully inclusive PPP (People, Planet and Prosperity) assessment of the distance-to-sustainability of a product. It is based on what preventing all the negative impacts in the value chain of that product would cost.
Idea behind: Preventive costs as an inclusive measure of product sustainability
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.
How does it work?
The first necessary step is enabling a uniform and aggregable calculation of preventative costs for all aspects of sustainability (planet, people and prosperity) which companies together with their main suppliers can use. The suppliers transfer this information through the value chain. This hidden price of avoiding negative product impacts is expressed in “Eco Social Cost Units (ESCUs)”, a virtual monetary unit.
With these ESCUs, the Oiconomy standard provides a normalized way of measuring and communicating (un)sustainability throughout the product 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.
After this first step companies can start preparing for reduction of the hidden costs (their negative sustainability impacts) jointly with their suppliers and include the prevention costs into their supply chain transactions.
Dr. Pim Croes
Dr. Walter J.V. Vermeulen
Copernicus Institute of Sustainable Development, Utrecht University, Utrecht, The Netherlands
Oiconomy Pricing Foundation, Driebergen, The Netherlands