True cost is all about The External Ripple

When something is bought, we think the true cost is what we paid in that transaction. The true cost of anything however is much more than the transactional cost. I discuss this in the recent post: It is All about the Ripple…

I was reminded about the “True Cost” when I attended the sustainability movie shown at our school “The True Cost” (trailer below). This movie was about the ripple effects on so many by what is called “fast fashion”. Something I had not previously realized.

The low cost of our clothes encourages people to buy more clothes, ie. Fast Fashion. Unfortunately, those costs that we don’t pay are born by disadvantaged populations and our environment, something upon which we all depend which means we all pay the True Costs.

Currently our accounting methods do not account for the True of full cost – especially from nature. The current capitalism accounting methods favor supply side economics and market prices and these methods to not reflect the full costs or values. Resulting market inefficiencies mean Adam Smith’s “invisible hand” cannot make proper adjustments that would be made if all costs were being counted. 

Capitalism values lower prices and this encourages producers to shift costs to society, the public and the environment. True or total cost of ownership, or ecological economics, includes all direct and indirect costs and its impact on the system. Costs unknowingly born by society, rather than the producers, are termed externalities. For instance, polluted air or water caused by local industry is an externality or cost born by the public at large rather than the pollution-producing entity.

Externalizing costs impacts business decisions because, unless stipulated by law, these costs are not recorded. As an illustration, consider the industry-ignored externalities from single-use plastic bags used yearly in the US. The externalities were equivalent to burning 439 million gallons of oil, leaches of toxins into the soil and water, and harm to wildlife cost an estimated $4 billion.  Noting these impacts has led many to ban the use of single- use plastic bags. The invisibility of externalities also negatively affects benefits because they are hidden by current accounting methods.

While most see this issue as unavoidable, Interface International offensively designed a plan to change from a destructive to a restorative company. They created a collaborative, sustainable business strategy that expanded its business, increased its profits, helped employee morale, increased profits, and improved the environment. Interface was an example of how selfish, selfless, synergistic processes designed to benefit the customer, the company and the environment, generates improved outcomes.

Ray Anderson was the founder andvisionary leader of Interface Carpets who rebuilt that company from one that was ecologically destructive to one that is becoming restorative. You can see his inspiring TED Talk below.