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Green Transition

The Potential of ‘True Pricing’

By Jonas Hirschnitz

This interview with True Price co-founder and executive director Adrian de Groot Ruiz discusses the initiative and beyond this tries to explore opportunity structures for change. Which type of activism works best to reach the goal of a sustainable economy, and which implications might this have for Green parties?

Jonas Hirschnitz: Could you shortly outline what the True Price project is, who started it, who is supporting it? What are your goals?

Adrian de Groot Ruiz: Our starting point is that we see a large trend in the business sector towards providing transparency about external costs we impose on the environment and on society. Puma published the first environmental profit & loss account in 2011, and now you see that this initiative is taken up by other companies. But how do you go from transparency to impact? We think that if you really want to internalise the impact you need the masses to come along. This is why we say you need to mainstream the initiative to a broad audience and this is how we came up with the true price. What we want to do to reach this is to create markets for products that have a competitive true price. This way you ensure supply of and demand for goods that show their true price, allowing people to choose the produce with the best true price.  Our long term goal is to have a sustainable economy.

So in principle you make the price of a product transparent, in revealing its environmental and social costs, and in the end you rely on the consumer to make the right choice, to buy the product with the lower true price. Is there a role for governments?

Yes. Of course you can add the role of the government to remove perverse incentives, for instance now in Europe it is less expensive to import leather, although it has a higher environmental footprint than some bio-synthetic products. We could also imagine that at some point once the sector has an agreement how to measure and monetise externalities for instance the EU adopts a legal requirement to label every product with its true price.

How do you position on governments regulating negative externalities through taxation? Is this the wrong approach?

No, not per se. Yet, we do not think that the main mechanism would start at the government, mainly because what you need is a drastic change in how people perceive things. If you really want to make a radical change, then governments would have to increase taxes by a lot. And we do not see governments doing this in the short term. We also think that they won’t have legitimacy. So if you see that there is actually quite a large degree of distrust towards elites we think that there would be a big backlash if governments would start to tax the true price. So in terms of legitimacy we think it is important to keep this in mind and therefore our goal is people making this choice freely.

Do you really think that people trust multinational companies more than their governments?

Not necessarily. We do not think that companies should be the ones to determine the true price: of course you need an independent third party such as True Price, or another NGO. We could even say that at some point it is governments conferring legitimacy to a method to determine true pricing. But to start the process, we think it is most effective to let people participate in the process of developing how to determine the true price. In that way they will understand it better, they will see it as part of themselves and not imposed by an elite, and then in the long-term it will have an even larger chance of success.

Concerning this consumer behaviour: The true price will feature on a product label as an additional price. It will not be the quoted price of the product the consumer pays at the counter. What if people do not have the financial possibilities to buy a sustainable product with a low true price, but have to buy an unsustainable product with a high true price but a low quoted price? This question appears all the more relevant in the context of the economic crisis, with an ever increasing number of people in poverty.

You always have alternatives. True pricing can show you which alternatives are best. For example, not everybody needs to own a car or an office space, you can also share this. And you do not need to eat meat every day. True pricing can lead people to make smarter choices. If we believe that there is a sustainable world that is possible, then we should also believe that people can live in a way that is in accordance with true pricing. So if it is really impossible – if you say 90% of the people would not be able to afford it – then we would have a problem anyhow.

Those ideas sound very familiar. Can the true price act as an amplifier for other initiatives?

Yes exactly this. With true pricing you can stimulate what people today are already pursuing with initiatives such as the circular economy, or the bio-based economy. True pricing as such does not do anything if no other trends towards a more sustainable economy work with it. The true price can easily demonstrate what is better for the environment, and it can do so in a credible way.

Who exactly is developing the standards for a true price?

We will develop those standards together with NGOs, government agencies, companies and universities[1]. We think it is important to have a multi-stakeholder approach to this. You need companies to be on board and we should also see them as part of the solution. They are the ones who will need to publish the true prices, because they have the information and they are the ones who can change their supply chains, but you also need universities to ensure a certain degree of legitimacy and objectivity, and you need NGOs to also have a critical voice at the table and for their expertise on supply chains.

Who will oversee the correct reporting of the companies?

We think we should start from the market. But we could imagine that within 5 or 10 years, when there is broad agreement in civil society or the market, governments start to codify it. You could draw a parallel to certification programmes such as the Rainforest Alliance, FSC, and Fair Trade that often work by themselves and are not government regulated.

Attempts to Green the economy exist for more than 20 years already. Why do you think you can be successful now?

I think in recent years you have seen a transition in the role of companies, who are now more willing to take their externalities into account and also consumers are no longer looking at the government when they expect sustainability. Perhaps there is also a sense of disappointment in coordinated government action. If you look at carbon emissions trading, Rio+20, or Copenhagen; not a lot came out of that. Also therefore citizens might say: ‘let’s see if the market can do a better job’. I think this is one of the important changes in ‘zeitgeist’ that have contributed to the possibility for change today. The other thing is that we see a massive movement towards transparency through social media.

Do you think that Green parties are seen as part of this ‘government failure’ you described, and are not really seen as an alternative to the government?

It is difficult to say. Speculating you could say that people have become more sceptical of what you can do with governments, so what Green parties could achieve, and this may be fair or unfair, but there is a disappointment. And also that Green parties may have a branding problem. That they are seen as part of an elite. Combining that with the increased distrust in elites this might make them less effective. Perhaps, Green parties need to find better ways to connect with the same mainstream sentiments. That’s one of the parts which we deem as important – that we make it mainstream. That you don’t present it as the purist alternative but as something that could change the entire economy.

So do you think that an effective movement or political force today should rather concentrate on the mainstream, and not have a radical stance?

I think so, and one mainly should look at solutions. In the Netherlands for example companies sit together with NGOs very easily. So you have Greenpeace and Akzo Nobel[2] sitting at the same table. In that way you can come together and you can work together. Of course you also need very critical voices, but to change the mainstream it is important to focus on solutions.

JH: OK, to round off: where is the project now exactly, and what are the next steps?

We finished consulting stakeholders. This year we are going to develop the methodology, which is open source – this is really important for us. Second, we want to have a few pilot products with true prices. Third, we are going to launch a global online community and we are going to ask consumers to let us know on Facebook that they want true prices. This can give a lot of leverage on companies.

Do you have any headline targets by when you want to have true prices established?

By 2020, we want to have true prices globally in place. So that you can calculate any product, any sector and that all companies are willing to provide the information. We aim to have competition and a market place for this idea. And then, hopefully, in 2030 you have internalised costs and you have a sustainable economy.

 


[1] Current partners and members of True Price include Sustainable Trade Initiative, AkzoNobel, DSM, FMO, NCDO, Oxfam and UDB

[2] AkzoNobel is the largest global paints and coatings company and is a leading producer of specialty chemicals.

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