True Price is a a Netherlands-based organization that has created a pricing system that shows the … [+]
Rising prices at the grocery store have many of us paying more attention to the cost of our food, and how systems that feel outside of our control influence those prices. While it can be challenging to convey or grasp the scope of the world’s food system, one organization is taking this concept to the supermarket shelves by showing people the actual cost of some items on the shelves — from the land used to grow produce, to the growers who provide it, to the businesses that bring it to the shelves — and raising awareness of the need for economic and agriculture reforms.
Many food businesses maintain a focus on maximizing their margins for profit, but some companies are realizing the implications of their actions and adopting practices to protect the future of the planet and people. To help these companies, Michel Scholte co-founded True Price, a Netherlands-based organization that aims to reduce food insecurity and shape a sustainable global economy through a pricing system that incorporates the cost of negative social and environmental impacts. “We wondered what we could do to bring this idea to regular businesses, regular consumers,” he says. “It’s not a centralized plan-based economic model, but it’s really a kind of information infrastructure. With true price we refer to the market price plus the unpaid external costs.”
By including the environmental and social costs of food production, True Price aims to make healthy and sustainable food more affordable for people and profitable for companies. Scholte says the current pricing system doesn’t reflect the true value of food, and more than 3 billion people around the globe cannot afford a healthy diet due to high food prices. Through a methodology that incorporates the external costs associated with production, True Price hopes to help raise awareness of the implications of current business and market practices that often fall hardest on agricultural growers and field workers, as well as the Earth they tend. “Farmers can get a good price sometimes but mostly it’s a very bad price,” he says, adding that the system is set up to “make sure that there’s sufficient production so that they cannot outcompete themselves out of poverty.”
As part of my research on purpose-driven business, I talked with Scholte more about the motivations behind True Price, how the organization conveys its message in partnership with others, and how it continues to develop and share open-source methodology with a broader goal to help advance global systems change.
Chris Marquis: Why did you decide to start True Price?
Michel Scholte, Executive Director and Co-founder of True Price
Michel Scholte: With my good friend and co-founder Adrian de Groot Ruiz, we both had some sort of epiphany, but it’s also kind of a lesson we learned when we were relatively young. I was trying to gather money for communities in African countries that suffer from the lack of sanitation. I read the book The End of Poverty by Jeffrey Sachs, and I saw this rational way out of it.
When I went to college I studied sociology because I noticed that financial economic systems actually have this sinister intention. We keep these commodity countries, where farmers sometimes can get a good price but mostly get a very bad price. We make sure that there’s sufficient production so that they cannot outcompete themselves out of poverty.
My co-founder started his Ph.D., I started my bachelor’s, and we both joined a debating society, but also we joined a think tank called Worldconnectors. We were giving advice to ministers in the Netherlands, advising to raising the governmental budget for food security at the Ministry of Development Corporation. At the Dutch 2010 elections the political climate became more nationalistic and, basically, there was no way that we could propagate these ideas.
We wondered what we could do to bring this idea to regular businesses, regular consumers? An idea that struck the room, like lightning, was basically what’s now True Price. If we would have that and we would solve all the clutter by legitimizing a broader kind of global trade scheme.
You have fair prices in a way, and in a good way, in a way that you respect entrepreneurship. You can go bankrupt in a true price economy, but you can also be very successful. It enables individuals to make choices, to find innovations. It’s not a centralized plan-based economic model, but it’s really a kind of information infrastructure. It’s a safe living space for corporate endeavor and sustainable production and consumption.
Marquis: I’m curious about the methodology you use to determine the true price of items. There’s a lot of debate around carbon pricing, with different assumptions, and that’s a much more straightforward calculation than the social and labor inputs that True Price incorporates. How have you developed that methodology over time?
Scholte: Basically we take a rights-based approach based on the key premises for human life to be possible with dignity. Those include having a house, having food, having access to water, having a living — and you can debate whether or not a living wage is enough — sufficient to fulfill those basic requirements financially. That includes the environment side, free from toxins that destroy your health, free from exposure, and the possibility to free yourself from unhealthy food. We consider it very important that you have access to sustainable, healthy food. People live nowadays in these obesogenic food landscapes.
It also includes being free from exploitation. We use detailed descriptions of what we consider acceptable labor, as well as the health and safety of labor, and if you infringe upon those then you infringe on those rights. It’s mind-boggling how much slavery still exists in the world, as well as child labor. We look at the cost to remediate those harms — compensating, preventing, retribution.
We determine value in the context of the U.N.’s Universal Declaration of Human Rights Companies have a responsibility to respect human rights, so that means they have to take additional responsibility beyond what you may expect from business as usual. We calculate the costs to restore, compensate, prevent and penalize infringements of human rights.
Marquis: Can you walk me through an example of a true price for a product? One could be Tony’s Chocolonely, which has really great human rights practices and has set itself apart in the chocolate industry. What would it take for other companies to raise their standards to a similar level?
Scholte: Poverty drives a lot of issues in the cocoa market, where the big chocolate companies purchase the vast majority of cocoa. Prices are often too low for the farmers. Another problem in the cocoa market is that you see a lot of enslavement of people, even children, who are traded and sold. There’s such poverty that parents who have maybe several children will sell one of their children to middlemen, who then rents labor to farmers. Those farmers themselves have children and live in harsh conditions, so it becomes a matter of children helping to bring food to the family table instead of going to school. It’s a really complicated situation for many smallholder farmers.
We’ve worked closely with Tony’s Chocolonely on its mission to eliminate slavery and child labor in the cocoa industry. We got to know each other. Then they asked if we could help them with their goals. They were our first real client, after we worked with Oxfam and other NGOs to get things off the ground. In 2013 we did the first assessment of the true price for cocoa, and we noticed that there actually was quite a big gap between that and what they were paying even though they were doing better than the other large chocolate companies. By quantifying the social costs in the cocoa value chain, such as underearning and child labor, Tony’s Chocolonely has adapted its price-setting strategies to help farmers make a living income.
Chris Marquis: Can you explain the True Price three-step method? Can any sort of company then apply this to their supply chain? Or how much customization needs to be done for different industries, different companies?
Scholte: We continue to develop and share it as an open-source methodology that should be accessible to anyone involved in markets, including consumers and farmers. First of all, you need to map, trace, and identify the location of production activities, the consequence of these activities for human and natural conditions. Then determine the harms in volumes, in toxic ingredients, labor — all sorts of things. Or the emissions, such as carbon and carbon equivalencies. Finally, we calculate what it costs to remediate these damages.
For an example, let’s consider the soil of a small farmer. You can actually do soil and water measurements to monitor the extraction of water, fertilizer that is ending up in the water around the farms. And you can identify what is needed to clean the water, for example, and bring the ecosystem back to its original state. Theoretically, to price this you can actually ask from an invoice from a supplier who provides this service.
We make local and sometimes global estimates of the cost for compensating, for preventing harm in different sectors. There are programs addressing these issues that can be references for factoring in the cost. For example, there’s actually a child labor prevention methodology or system that actually identifies the children, provides them with mental or physical care and some education, and provides additional income for the family if the child doesn’t work.
In Amsterdam, we opened a first True Price Store in 2020 and “supermarket” where we sell chocolate and coffee. In 2021 the first supermarket with True Prices opened it’s doors. The sales of the supermarket increased with 5% in the first year and we have sold over 100.000 products with a true price. Finally, we can experience what happens if we have the prices right.
Marquis: How do you address concerns that a true price may have an unfair effect on people with lower incomes? Similar to how some taxes in the U.S. are regressive and put a higher burden on people with lower incomes.
Scholte: First and foremost, It is about providing the transparency about what the true prices of products are. We then need to design markets in a way in which basic sustainable and healthy goods such as food, housing, transportation, stay accessible and affordable for all. Governments may decide to tax on for example gasoline because it has high costs to the environment. It is important that these taxes are progressive; so that the richest pay proportionally more. And that people receive sufficient income to keep access to basic goods and services.
Our idea is that we say you, the consumer, must have the ability to voluntarily pay the true price. At this moment this is not even possible. Eventually it’s better for everyone if we start paying for it.
We need to address the large income disparities around the world, but the scale of the challenge is daunting. Globally, at least about 750 billion euros would be needed annually to bridge the living wage gap. So then there’s the question of how to absorb that.
Governments should focus on affordable housing, health care, education, transportation — all sorts of other things that can help lift people out of poverty. We should provide the kind of foods, work, and living wages that can actually enable people to pay for true prices.
Marquis: How are you raising awareness of this concept among consumers and policymakers?
Scholte: We basically take a two-track approach. On the one hand we work on a movement where we use prices are actually implemented by supermarkets and brands. By showing it in practice, we hope to build this out to a global community of consumers everywhere, not just the Netherlands. The templates are there. We have replicable, scalable infrastructures with technology as well..
We hope to support farmers that are more sustainable, for example because they have more nature-inclusive farmer systems such as agro-forestry, but don’t see that effort reflected in what they earn for their products. And we hope to encourage government leaders to realize the need to create market conditions that reward individuals and consumers who invest in sustainability — let them make a return.
The second stream is policy or advocacy. We contributed to policy changes and discussions in the Netherlands, Europe, the United States, and the United Nations. For example, we worked with the United Nations Food Systems Summit on assessing the cost of all the food produced in the world. With a consortium of universities, we concluded that for the total expenditures on food globally the true price gap is more than $20 trillion, for $11 trillion food expenditures every year. That included unhealthy food related health care costs, so it’s a slightly broader definition. That was big.
We went to the World Economic Forum in Davos and together with Rabobank we contributed to a CEO statement that carried forward our True Value of Food Initiative. In Europe an addition to the farm-to-fork strategy included true pricing. We contributed to this with our work.
In the U.S., we contributed to the Rockefeller report that showed the true cost of the U.S. food systems. The White House now plans an official conference on food sustainability and nutrition. We indirectly contributed to this discussion,
Ultimately true prices need to be adopted globally. How long it will take us to get there? Faster than you think!
