What is the “true cost” of a product? In a world of declining ecosystems and growing awareness of “natural capital,” this isn't just an academic question. The "true cost" — which includes impacts to the environment — is of material interest. Because nature is often undervalued or considered to be “free,” its full price isn’t factored into the marketplace. In this innovative monthly column, Richard Mattison, CEO of Trucost plc, will show and explain the “true cost” of everyday purchases.
This price tag has significant business implications. For example, Trucost analysis shows that more than a quarter of profits would be wiped out across the world’s largest companies if water were priced to reflect its true cost across current production locations.
As a result, natural capital constraints will create winners and losers. Companies that act to optimize their products, operations and supply chains in line with natural resource availability and environmental costs will create competitive advantage from reduced input costs and security of supply. In addition, companies that find ways of communicating this will be able to harness the ethically aware consumers of the future. Perhaps the world's 3 billion new consumers will buy from companies that use less (or zero) to make more?