Introduction

Social issues, currently 27, are covered in this section, divided in 4 groups:
These issues are not covered in other categories either because their character does not belong in that category, or the used methods of assessment or calculation cannot be applied to the relevant issue. Costs of prevention, literally interpreted, are usually low or even zero, because the measure is usually to abstain from an activity, however, at the expense of profitability. Therefore, as for the aspects of corruption and violence and for financial issues, the net operating margin is the closest to the costs involved in abstaining from social irresponsible activities.
Non compliance on a series of economic or financial criteria would result in a very low rating.
An interest difference of about 16,5% between Moody’s AAA and junk status of 10-year country credit bonds is not uncommon. Therefore, for financial aspects, the ESCU allocations can be  maximized to 16,5% of the 5-year sector average profit margin. Assuming that an organization, not complying to all 27 social responsibilities should not be allowed to make a profit, preliminarily 16,5 % of the sector average profit is allocated. Because no different impact data are available for the different issues, the characterization factor is assumed equal to 1 for all issues, resulting in an ESCU score of 16,5/27 = 0,61% of organizations’ net operating margin per issue.

Labour related aspects, not covered in the section of labour,
either occurring in ILO conventions, or very common criteria in national legislations or delivery contracts.

1. Discrimination in personnel policy, advertising or other communication considering sexes, health, handicap, religion, race, origin, age, political conviction, pregnancy or migrants, including unequal gender distribution in the organization’s leadership.
2. Lack of efforts to stimulate labour participation of minorities, disabled and underprivileged. However, this standard does recognize the necessity of well qualified personnel for the job. Lack of participation.
3. Physical or mental violence and harassment to persons inside or outside of the organization.
4. Lack of demonstrable involvement of vulnerable groups and lack of avoiding discrimination by gender, race or other, and in low income countries of local suppliers.
5. Payment of suppliers, employees or other workers more than 30 days after delivery or after the agreed limit of the payment date.

Property rights related aspects.

Property, rights have positive and negative effects. They protect ownership and stimulate research and development, but may also slow down sustainable development and by huge profits on essential needs transfer wealth from the poor (consumers) to the rich (shareholders). 

6. Illegal use of a brand name, knowledge, domain, design or intellectual property of others, use of origin statements without substantial activities at the relevant location. The strictest legislation of all countries involved in production, trade and consumption applies.
7. Violation of property rights of both tangible goods and intellectual property.
8. The use of property rights based on DNA or properties directly from nature (e.g. natural seeds).
9. The use of property rights for longer than 10 years after first launch in the market on food and health products .
10. The use of property rights on sustainability enhancing developments, longer than 10 years after first launch in the market.
11. Under-market compensation for acquired property and using any pressure to acquire property.
12. Disrespect for not well defined traditional property, e.g. involving indigenous people, or their culture and rights.

Communication related issues

Following criteria are either common legal criteria, common misleading communications, advertising harmful products, common annoyances or incomplete information potentially leading to extra expenses for consumers.

13. Advertising without respect for groups of the society, such as stereotyping, or advertising on media that divide instead of connect, or on media that do not prevent use by others of their media to divide or mislead.
14. Advertising with potential wins, prizes or profits without publishing the chance, or advertising subscriptions with temporary reductions without mentioning the expiration data of the reduction and what cost may be expected after the reduction period. (exception: lotteries and other products that present this chance/risk ratio and the related uncertainty as the product itself).
15. Advertising smoke, health damaging food- or care-products, or pharmacological products (except on medical prescription), without presenting substantial negative side effects as one of the clearest communications. Not intended here is a copy of the package leaflet for prescriptions, but only the major issues (such as cancer by smoke).
16. Use of health claims without reference to published independent and reviewed scientific evidence of their correctness.
17. Use of misinformation about the product or purpose and consequences of use. (communicate your own strength’s and not the competitors’ weakness).
18. Communicating negative information on competing products and companies.
19. Not consistently communicate the sustainability as it is determined by the use of the Oiconomy standard together with advertising about or including aspects of sustainability.
20. Incomplete, ambiguous, insufficient transparency of vital information, or information that raises expectations not conforming the product, on packaging, information leaflets, contracts, webpages, prospectus and other ways of communication about the product or company.
21. (Risk of) violation of privacy.
    1. Spam, uninvited telemarketing or other methods of violating the privacy of private persons.
    2. Keeping, disclosing or using personal data without a proper reason or without knowledge of the involved persons.
    3. Insufficient protection of personal data, both physically and digital.
22. Advertising that insurance will pay for a product.
23. Lack of easy access and/or follow-up to service desks for complaints and grievances. (The responsible organization keeps waiting times limited, answers in countries’ own language, documents and effectively investigates and solves complaints and incidents and takes measures to prevent repetition).

Issues not belonging in any other category or group                            

24. Noise (>50 decibels in living areas), vibration, smell, dust, traffic in living areas or other disturbances to people, where this matter is not covered by the section on public health.
25. Earthquake-, land slide, avalanche- or flood risks due to operations, in areas where it may damage others.
26. Damage to cultural heritage.
27. Direct or indirect lobbying with the intention to weaken or delay any sustainable development on aspects discussed in the Oiconomy Pricing system.

Characterization Factor and Indicator

The characterization factors of the 27 different issues are all assumed 1, because there is no objective way to weigh the relative impact of these issues.
The indicator is the Percentage of issues with non-compliances multiplied with the net operating margin and product price.

Targets

Complete compliance to all 27 criteria

Background calculations

ESCU’s = PP x 14 x PLNC x BNOM, where:

PP is the product’s price
14 is the regularly occurring number of issues (the other 13 are sector-dependent or not very common), which is taken as the worst case.
BNOM is the background average net operating margin of the sector.
PLNC is the assumed % Profit Loss per Non-Compliance.

Foreground calculations

ESCU’s = PP x NC x PLNC * FNOM, where:

PP is the product’s price
PLNC is the assumed % Profit Loss per Non Compliance.
FNOM is the foreground 5 year average net operating margin of the sector.

 

Introduction

Animal welfare is a very complex aspect with questions like how to define and measure; What is the target; Is species categorization necessary and if yes how to do that? The aspect of animal welfare affects other aspects both positively and negatively. Some examples: Providing more space to farm animals and lower yielding organic agriculture also requires more land, but mitigation of the amount of non-vegetarian consumption saves land and land is a prerequisite to prevent hunger; Livestock’s industry over-reliance on human-edible food as animal feed has increased food insecurity and a detrimental impact on biodiversity. Use of antibiotics increase yields and therefore reduce hunger and poverty, but increase the risks of resistant human-pathogenic bacteria. Large scale low cost agriculture keeps food prices low, but increases poverty of large numbers of small scale farmers (UNEP & OIE Global Forum on Animal Welfare, 2020).

Next to environmental aspects and the direct harm-impacts to animals, high animal welfare standards are increasingly experienced as a moral need. People feel uncomfortable to contribute to harm animals and withhold them from their species typical behavior. Therefore the O.S. subcategorizes animal welfare in the category of “Various socialaspects”.
Animal welfare is very difficult to measure, nor is a characterization factor available on the relative seriousness of the impacts to animals of the different harms inflicted by mankind. There are also no data suitable to determine the group of 20% best performers.
Therefore, the Oiconomy Pricing System follows its third methodology option for an indicator in its methodology: a reducing governance factor multiplied by the maximum preventative costs.
Available and widely accepted (e.g. by the European Union (Eur-Lex, 2020; Welfare Quality Network, 2009b) are the five freedoms of animal welfare:

Indicator

1. Freedom from hunger and thirst: by ready access to fresh water and a diet to maintain full health and vigor.
2. Freedom from discomfort: by providing an appropriate environment including shelter and a comfortable resting area.
3. Freedom from pain, injury or disease: by prevention through rapid diagnosis and treatment.
4. Freedom to express normal behavior: by providing sufficient space, proper facilities and company of the animal’s own kind.
5. Freedom from fear and distress: by ensuring conditions and treatment which avoid mental suffering.

These five freedoms present very general principles for animal wellbeing. The actual issues vary per species, type of human activity, country, climate and even culture and religion. However, based on these 5 freedoms, standards have been developed describing minimum conditions for specific species of farm animals, e.g. (Animal Health Australia, 2020; Animal Welfare Standards, 2022; Farm Animal Welfare Council, 2009; Textile Exchange (responsible down standard), 2014; Better Life Label – Animal Protection, 2022).

Various standards on animal welfare include criteria on organic agriculture and all organic agriculture labels include criteria on animal welfare, which complicates the specific determination of the preventative costs for animal welfare.
The EU Welfare Quality© project’s welfare assessment protocol, provides a protocol of scoring criteria (based on the 5 freedoms of animal welfare), including derived specific protocols for a number of animal species (Welfare Quality Network, 2009c, 2009b, 2009a, 2012, 2018). This assessment protocol only considers animal welfare criteria and expresses these in a “WQ score”.

These standards do not include criteria on the keeping of animals related to a goal, like for fur, testing, education, breeding tourism and entertainment. On the breeding of animals for fur, the Furfree Alliance published a summary of legislation in European countries (FurFree Alliance, 2015), showing that the matter is quite widely considered immoral and already banned in various countries, like Austria, parts of Belgium, Netherlands in 2024, Croatia, Denmark for foxes, Germany in several states, Slovenia, Switserland and the UK, several states in the USA, Japan, New Zealand.
The European Union also banned testing on animals of cosmetics (The European Parliament and the Council of the European Union, 2009) and in the USA a bill to this goal is pending (USA Congress.gov, 2021). Therefore, the Oiconomy Pricing system considers breeding or keeping animal for fur and testing for cosmetic purposes unsustainable.

(Gocsik et al., 2016) determined the WQ score and involved costs of a series of poultry farms.
A Volwaard en Eerlijk piece of chicken had a 27% higher WQ score than conventional chicken and a 22,6% higher production costs than standard intensive poultry farming. “Extensive outdoor” a 25,4% higher WQ score and 47,6% higher costs. Organic a 21% higher WQ score and a 139% higher costs.
These data demonstrate the huge difference (mainly due to higher feed costs) between the costs of fully organic poultry and farms only complying to animal welfare criteria.

A German research (Institut Agrarpolitik und Landwirtschaftliche Marktlehre Fachgebiet Agrar- und Ernährungspolitik, 2016; Wissenschaftlicher Beirat Agrarpolitik beim BMEL, 2015) on the involved costs to achieve potential legal animal welfare criteria, and also based on the 5 freedoms  shows the following costs distance at farm level:
Pork:                28-41 % from the average sales price at farm level.
Poultry – eggs:   7-18 %    “
Poultry – meat: 9-22%      “
Cows Milk         2-5%       “
Beef                 18-27%    “

Standing out is the almost equal costs between the Gocsik determined preventative costs for poultry meat and the maximum of the range for poultry meat in the German research (22,6% and 22%).
Because on the aspect, we are looking for the worst case costs to be reduced by the demonstrable governance factor of the specific organization, The German maxima are used as background data.
The background ESCU’s for all birds and small animals (e.g. rabbits) are assumed equal to chickens; The background ESCU’s for all large farm animals other than cows kept indoors are assumed equal to cows for meat and kept outdoors to cows for milk.

Targets

No specific one-indicator assessment of the welfare of an animal is available. Various comprehensive multi-criteria standards are available. Therefore, for this aspect, certification to some standards, meaning 100% compliance to all criteria results in zero ESCU’s. Otherwise, the target is optimal governance of animal welfare.

Background calculations

In absence of an O.S. approved certificate covering animal welfare, the ESCU’s are determined by:
ESCU’s = PP x MPC x RMF x M%, where:
PP is the product’s price.
RMF is the Reducing Multiplication Factor determined by a set of PDCA based governance quality determining criteria.
M% is the issue mitigation percentage. For the remaining percentage, the background ESCU’s are calculated and added.
MPC is the maximum preventative costs, derived from (Institut Agrarpolitik und Landwirtschaftliche Marktlehre Fachgebiet Agrar- und Ernährungspolitik, 2016; Wissenschaftlicher Beirat Agrarpolitik beim BMEL, 2015). The maxima from the reported range of percentages from the sales price at farm level were used. For other animals, values were assumed equal to a known value for a similar animal (e.g. for all bird meat the value for chickens).

Foreground calculations

The organization is challenged to determine the foreground costs to improve the RMF and therewith the animal welfare. The foreground calculation formula is:
ESCU’s = PPP x RMF x IC x M%, where:
PP is the product’s price.
RMF is the Reducing Multiplication Factor determined by a set of PDCA based governance quality determining criteria. For the remaining percentage, the background ESCU’s are calculated and added.
IC is the improvement costs per unit of product.
M% is the issue mitigation percentage. For the remaining RMF score, the background formula is used.

Introduction

Next to pollution, health and safety issues and depletion issues, product use may cause harm or annoyances by their use. Three product-use aspects are currently covered by the O.S.
The use-sections of the Oiconomy Pricing Tool only request foreground data, but even these may not be available.
Currently, there are not enough data on use-related social issues to create background data on a reasonable amount of products or even product categories.
However, because the use phase of a product is the responsibility of the end-producer, there are no unknown suppliers involved and therefore, the end producers should be able to provide the data.

Issues

• Instructions for use
• Product Warranties

Instructions for use

Introduction

Clear and correct instructions for use of products are an important means for the effective achievement of sustainable development. E.g. these criteria may affect product life, energy consumption, product related health and safety issues and sustainable disposal.
Instructions may be provided on the product or packaging or on the internet if clearly referred to on the product.

Indicator

The number of target criteria not met.

Target

Instructions are:

1. Checked and approved by a qualified independent person with the native language.
2. In the right and correct language
3. Complete, nowhere confusing and completely conforming the use of the utensil
4. Up to date
5. Understandable for every normal user.
6. Including how to maintain a long product life
7. Including how to repair the most common wear, failings and damages
8. Mentioning where to obtain spare parts.
9. If danger or complexity is involved or special tools are required, the instructions include advise and addresses about where the product can be repaired or maintained and how to contact.

Background calculations

The actual costs of prevention are not available and will be quite product- and sometimes location- dependent. Without foreground data, the O.S. preliminarily allocates ESCU’s as follows:
At zero Non Compliances (NC) to the 9 criteria: ESCU’s = 0.
At max 2 NC’s: ESCU’s =  0,5% of the sector average net operating margin.
At >2 NC’s: ESCU=s 1,0 % of the sector average net operating margin.
There is no scientific justification for this calculation of ESCU’s.

Foreground calculations

N/a

Product Warranties

Introduction

Product warranties are important because they place the responsibility for the quality of the product on the supplier. They improve product life and quality. Because also sustainability aspects, such as safety, use-depletion and pollution, and energy consumption belong to product’s properties, warranties also apply to sustainability properties.

Indicator

Yes or no compliance to the criterion of giving responsible product warranties.

Target

Product Warranties, complying to the legislation of both the countries of production, sales and use, easily accessible for consumers/users in all languages of these countries, easy to contact for complaints and replace failing products.

Background calculations

Without proper responsible warranties, ESCU’s are calculated as follows:
ESCU’s = 2% of the sector average net operating margin. There is no scientific justification for this calculation of ESCU’s.

Foreground calculations

N/a