With Pietro Galgani of Impact Institute (a spin-off of True Price) we discuss what a world where you pay the true price for a product, including all the environmental and social costs, would look like as well as what we need to know about true pricing, and why it’s the key towards a more sustainable food system.
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What would a world look like where you pay the true price for a product, including all the environmental and social costs? It is crazy that all these externalities are not part of our accounting and thus pricing. We have often talked about true cost accounting and true pricing on the podcast but never really unpacked how to get there? There are many experiments happening at the moment and I’m very happy to unpack them with one of the pioneers in the space! Why should externalities be included in the pricing? How does true pricing promote sustainable transition towards regeneration?
Delving Into ‘True Pricing’
The key towards sustainable transition towards regeneration is the implementation of ‘true price.’ A product’s true price is its selling price that includes its social, environmental, and health costs when being produced (e.g. air and water pollution, greenhouse gas emission, labor costs) as well as when being used (health impacts such as obesity, cardiovascular diseases, etc.). The implementation of true price constitutes a holistic solution that does not backfire in any way and avoids many unintended, but unfavourable effects.
“When I saw the organisation True Price, I was really fascinated by the idea of pulling down social and environmental impacts together in one coherent framework.” – Pietro Galgani
Impact Institute’s True Pricing
The implementation of true price allows the collection of ‘premiums’ that the Impact Institute and True Price can use for many causes. While the Impact Institute does not have any means to give back the premiums to the farms where some true priced-products are directly from, they use the funds for projects that revitalise our resources such as carbon offsetting, reforestation and funding for low-wage farmers that pay for social costs and environmental costs themselves. Ultimately, the Impact Institute’s vision is to use true pricing to compensate the ones receiving the damages.
“You cannot pollute the water, you have to put in more filters, you have to change your technology. That way, you internalise this cost. And then the product is sustainable, and the production becomes sustainable.” – Pietro Galgani
The Rights-Based Framework
The rights-based approach to true pricing, as developed by the Impact Institute, places high importance in health costs. This means that the production of an ‘unhealthy good’ is not only the producer’s responsibility, but also the buyer’s. For the production to completely shift into something that benefits both sides, there is a need for remediation. According to Pietro, consumers are starting to become aware of the true pricing, and some already pay for it. In fact, in the Netherlands, a supermarket called “de Aanzet” mandates true pricing.
“I think that’s an interesting possibility- making it possible for consumers to cover it [the externalities] without having to have the whole intermediary value chain step.” – Pietro Galgani
A Three-Step Approach
Externalities considered, statistics could tell that the true price of our food should be three times as much. However, with a sustainable food system such as the three-step approach the Impact Institute built, we should not have to pay triple. Slowly, more consumers are demanding for transparency, wanting to see what the products they consume are made of. With the increasing consumer awareness, pretty soon, many would have the option to pay for the externalities of the products they consume. Hopefully, once the world is ready, we could have the best products with the most reasonable price, and most importantly, with the least damage to our resources.
“We hope that we can have a more sustainable food system which doesn’t triple the price.” – Pietro Galgani
Other Points Discussed
Koen and Pietro also talked about the following:
- The global impact of 10 cents extra cost per cup of coffee
- The United Nations’ “Guiding Principles on Business and Human Rights”
- How we should have the technology to accommodate those willing to pay the true price of their products
- Avoiding monopoly within the industry by allowing everyone to participate, including those on the ground
- 3 step approach in true pricing: 1 transparency, 2 if you want you can pay, 3 mandatory
To know more about Pietro Galgani and the Impact Institute, download and listen to this episode.
- True Price
- Impact Institute
- Principles for true pricing, framework and other resources
- New Amsterdam store sells goods at the price required to avoid pollution, exploitation and climate change
- Amsterdam Is Embracing a Radical New Economic Theory to Help Save the Environment. Could It Also Replace Capitalism?
- True price café in Breukelen
Listen also to:
- Jurriaan Ruys, planting trees to restore 2b hectares degraded land
- Harrie, Arnout, Koen – Where we plant billions of trees vs climate change?
Feedback, comments, suggestions? Reach me via Twitter @KoenvanSeijen, in the comments below or through Get in Touch on this website.
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The above references an opinion and is for information and educational purposes only. It is not intended to be investment advice. Seek a duly licensed professional for investment advice.
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