Reports produced by IDH, the Sustainable Trade Initiative in The Netherlands, and True Price claim to have determined the ‘true price’ of well known commodities and have estimated costs that usually remain unmeasured. These ‘hidden’ costs to society are not – yet – part of the market price for the commodities. IDH notes that there are social costs involved in the production of commodities, such as underpayment of workers, health and safety accidents, child labour, forced labour, gender discrimination, harassment and lack of freedom of association. There are also environmental costs such as land use, air, soil and water pollution, energy and material use. By adding these costs to the sales price, a ‘true price’ was calculated.
“One of the barriers for farmers, traders, retailers and consumers to reduce those costs is that they are invisible,” said IDH. “For the first time, a public-private partnership with the world’s largest brands calculated what those costs are. Industry players can now use this information to reduce their costs with innovative projects, like agroforestry and yield improvement programmes.”
The first report focuses on reducing the societal costs in the production of cocoa in Côte d’Ivoire, the world’s largest cocoa producer. The key findings include the fact that cultivation of sustainably certified cocoa beans results in a lower ‘true price’ of approximately 15 per cent. Improving yields and eliminating deforestation can reduce the true price further, by about 30 per cent and 5 per cent, respectively. The societal costs are considerably higher than coffee from Vietnam, tea from Kenya and cotton from India, which were also calculated in reports from IDH and True Price.
Dave Boselie, Senior Manager Learning & Innovation at IDH, said: “These types of insights can help us set the investment agenda and facilitate collaboration with the private sector. By painting a picture of the major issues in the sector and their severity, IDH is able to quantify the impact of issues now, and over time, developing a targeted strategy that generates the most change. The results are also highly relevant for the other stakeholders in our partnership, including public sector and civil society organizations that play a role in developing the enabling environment for sustainable commodity production.”
For more information see the forthcoming July 2016 issue of Coffee & Cocoa International.