A project led by the University of Greifswald in Germany asks this precise question and informs customers of the real price of their dish once all external hidden costs have been taken into account.
FairPlanet spoke with Amelie Michalke, the project manager.
FairPlanet: How exactly does it help biodiversity when a customer is aware of the real cost of the food products they buy?
Amelie Michalke: In our economic system, supply and demand regulate the price. We talk about free markets, and prices are formed in these free markets when everything that goes into production is priced. Currently, however, the environmental and social consequences are not quantified. This means that we currently have lower costs and therefore lower product prices. In other words: external costs that arise during production are not taken into account. If they were taken into account, in the case of products that are anyway produced in a sustainable way, then the price would not increase as much.
But products whose production causes major environmental damage would be priced much higher. And the effect this would have on the market is simple: higher price – lower demand.
Of course, this does not apply to luxury items, but food is not meant to be a luxury item. Either way, the result would be that unsustainable foods are consumed less and ultimately produced in smaller quantities. In other words, negative environmental impacts would be limited.
What are some types of hidden costs?
We are currently dealing with ecological follow-up costs, such as greenhouse gases or toxic substances such as pesticides, and so on. This also includes energy consumption. But there are also follow-on social costs, such as animal welfare or fair wages, the eviction of indigenous population groups, as in the Amazon region, for the cultivation of animal feed.
In other words, all those costs that are incurred throughout the value chain, but for which no one pays a price. The problem: What price would you estimate for fresh air, or our climate?
Negative environmental impacts would be limited
Conventional agriculture is repeatedly mentioned as one of the main drivers of environmental degradation, also with regard to climate change. Can you explain why?
Agriculture, including all related areas such as land use change for agricultural land, is responsible for a quarter of all global greenhouse gases. It is enormous. The sector is of course very important because it literally feeds us. So you can’t just cut it. But it has huge potential to save greenhouse gases.
It is important to distinguish between different agricultural products. Animal products in particular have high hidden costs. Some calculations indicate that the animal products sector is responsible for more CO2 than the entire global transport sector.
Compared to agriculture as a whole, animal products are responsible for 70% of greenhouse gases, but provide only 30% of calories.
How much would food prices increase if all hidden costs were taken into account?
It depends on the methodology used to calculate the actual costs. The study we conducted with German discount retailer Penny looked at the factors energy, nitrogen, carbon dioxide and land use change. Pesticides, antibiotics and social follow-up costs are not even included. There have been price increases of 2-12% for plant-based foods, and up to 19% for conventional bananas.
For food of animal origin, prices have increased by as much as 174% for meat, about three times what they currently cost.
The project is a cooperation between the University of Greifswald and Tollwood GmbH. Can you detail your work with the company?
Tollwood GmbH is our associative partner, we designed the whole project together. Tollwood is a Munich-based cultural and event company that organizes festivals twice a year. They are art and culture festivals with a strong focus on sustainability.
They also launched the “Bio für Kinder” (Organic for kids), in which the kitchen staff of school canteens and nurseries are trained in the use of sustainable products and their integration into their menus. It was initially limited to facilities in Munich, but is now also expanding to Bavaria, and later to all of Germany.
At the Tollwood Festival, Toolwood GmbH also presents the latest research results from the University of Greifswald.
Actual Cost vs Actual Cost
At first glance, your cooperation with discount retailer Penny is surprising, as their main business model is to provide products as cheaply as possible.
We launched the project “How much does the dish cost?” in September 2020, and Penny joined as an associate partner. Penny planned a sustainability store in Berlin and as part of their marketing campaign they joined our project. The idea was to establish our search results in this store of sustainability.
When this store opened, we had an information point where we advertised sixteen foods with both price tags – actual cost and actual cost. And the media interest was actually mostly focused on our campaign. There was a lot of positive feedback, which Penny didn’t expect at all. At first, this did not change anything in the discounter’s purchasing policy, but it had a very good external impact, ie the public. We really want to expand our collaboration with Penny in the future.
Many food products would become much more expensive if hidden costs were taken into account. Isn’t there a danger that these groceries will then only be accessible to wealthy customers?
This is indeed a perfectly legitimate question. At this time, we are only describing prices that would be required to reflect actual costs. However, we are not yet ready to issue recommendations on implementation measures.
The social justice factor is very important to us. It is therefore necessary to develop measures that take this into account. Meat or other foods must not then become a luxury good. And those who can afford it are allowed to cause damage, and those who cannot afford it are disadvantaged or marginalized. A ticket for illegal parking, for example, is only a penalty for those who cannot afford it. This is why we have now integrated social scientists into our team.
One could also see the project as a psychological game, namely as a speculation that the client will feel guilty about the true costs. Do you agree?
Not really. We have a bad conscience when our actions are not morally justifiable. The irresponsible use of natural resources is not morally justifiable, because we use these resources to the detriment of future generations and also to the detriment of people who are already suffering from the consequences of climate change, in marginalized groups and in highly volatile regions.
That’s why I think a guilty conscience isn’t necessarily a bad thing here. It depends on what you do with it. And it is important to show the consequences of our way of life. If people really become aware of these consequences, consumer behavior will hopefully change.
By making the true costs of food products available to the public, isn’t the blame for false inducements throughout the supply chain simply shifted to the customer? Shouldn’t politicians introduce appropriate framework conditions for our market economy that meet sustainable criteria?
Yes, this is a very important point. Here too, it is a question of implementing measures. Our project is also an awareness campaign. We want to raise awareness of the price of our food if we produced it in a sustainable way.
What we do not want is to say that the sole responsibility lies with the consumer. In surveys, we’ve learned that 90% of consumers view politics as responsible, not the consumers themselves. Of course, distribution chains should also be required to behave sustainably. But these distribution chains need political framework conditions which require it and which also allow it.
If we ask politicians, we get a lot of approval, but unfortunately not much happens because politicians then fear the reaction of consumers at the ballot box.
“A guilty conscience isn’t necessarily a bad thing here. It depends on how you feel about it.”
Do you know of comparable projects carried out in other countries?
In the Netherlands in particular, there are a number of initiatives that go in this direction, such as the True Pricing Foundation or the University of Wageningen, which work intensively on True Cost Accounting.
We’ve been researching this topic for six years now, but over the past 2-3 years, the topic has finally caught the public’s attention.
How much funding did you receive for the project?
The funding for our entire network is approximately 800,000 euros for three years, which we, i.e. the University of Greifswald, and Tollwood GmbH receive from the German Federal Government.
How should this project end for you to consider it a success?
Expanding the campaign with Penny would be important to me. Of course, the coronavirus pandemic got in our way, which had a huge impact on the day-to-day operations of discount retailers like Penny. And of course, we did not foresee the war in Ukraine, which will have an incredible impact on the food sector. Therefore, it is currently unclear whether we can expand the project as we would like.
But I would consider it a great success if the topic got much more attention in public discourse. And, if possible, there should ultimately be a cooperative and productive exchange with politicians. At the end of the project, we will publish a catalog of policy measures. It remains to be seen to what extent it will be applied.
Amelie Michalke is an industrial engineer at the University of Greifswald in Germany and leads the study “How much does the dish cost?” project.
Image by Damla Ozkan.