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The True Cost of Food

How the ‘True Price’ Movement is Helping Repair the Broken Food System


There is an increasing awareness today that the current global food system is not sustainable, as evidenced by the popularity of regenerative agriculture, farmers markets, the Farm-to-Table concept, and the fair-trade movement. There is also great and growing demand for organic products—necessitating their importation from developing countries.

According to economic theory, prices are determined by the relationship between supply and demand.  ©Valentina Tubaro
According to economic theory, prices are determined by the relationship between supply and demand. ©Valentina Tubaro

Enter the True Price movement. This innovative concept seeks to alert consumers to the “true price” of food, which goes beyond the “retail” price by incorporating the hidden environmental and social costs incurred during production.


This revolutionary idea is designed to help shoppers make healthy and sustainable choices more easily—and contribute to a better food system.

The Inadequacy of the Current Pricing System


According to economic theory, prices are determined by the relationship between supply and demand. However, in the modern food supply chain retail prices do not actually reflect true costs due to negative "externalities."


For example, a 2021 report by the Rockefeller Foundation says that Americans spent $1.1 trillion on food in 2019.


However, the actual cost that year of food production, packaging, and transporting, plus immense “hidden costs” of $2.1 trillion, resulted in a total of $3.2 trillion, nearly three times the initial amount.


The hidden costs, or externalities, included adverse impacts on health—such as diet-related diseases—environmental degradation, and social and economic inequities.


Americans spent $1.1 trillion on food in 2019. ©Nodar Chernishev
Americans spent $1.1 trillion on food in 2019. ©Nodar Chernishev

To tackle this kind of incongruity in pricing, two enterprising young men from the Netherlands—a country with a history of seeking to tackle food sustainability issues—stepped up.


In 2012, after an epiphany of sorts, Michel Scholte and Adrian de Groot Ruiz co-founded True Price, a groundbreaking social enterprise dedicated to educating consumers about how food is produced and marketed, while giving concrete ways to help make a difference.


Executive Director Scholte and Director de Groot Ruiz met in college, where Scholte was studying sociology, and de Groot Ruiz was working toward a doctorate in economics. They discovered that they shared a passion for economics as well as concerns for the structural problems contributing to poverty and detrimental environmental practices. Subsequently, they joined Worldconnectors, a Dutch think tank promoting the UN’s Sustainable Development Goals, where they discussed what economists call externalities, i.e., the environmental and social production costs that are not considered in transactions.


The pair realized that governments were often unwilling to pass laws that restrict ecologically damaging practices of agricultural companies, which result in the pollution of the natural environment and ecosystems’ biodiversity loss. At this point, they had the brilliant inspiration to bring the problem directly to the consumer, and thus, True Price was born.


The True Price movement seeks to work directly with retailers to alert consumers to the need for more sustainable farming practices, and to remedy social issues such as child labor and underpayment of producers.

The True Price movement seeks to work directly with retailers to alert consumers to the need for more sustainable farming practices, and to remedy social issues such as child labor and underpayment of producers. This is accomplished by presenting a two-tiered price system. The first price is the retail price of an item, and the second is the higher “true price,” which incorporates the hidden environmental and social costs incurred during the item’s production.


By comparing the true price of similar items, such as two or three bars of chocolate, consumers can see which candy bar caused more environmental and social damage in its production. Then, the consumer can choose to buy the bar with the lowest true price—indicating lower environmental and social costs.


Moreover, the consumer could voluntarily choose to pay the “true price” rather than the “retail price,” thus donating the difference toward greater environmental health and social equity. This transparent two-tiered pricing is sometimes called “nudge marketing.”


Scholte and de Groot Ruiz make the case that true pricing would have been impossible in the past. However, it is possible today because of the advanced level of information technology, which makes it feasible to collect all the data needed from around the world to calculate the true prices of items.


Does the True Price Initiative Affect Consumer Behavior?


The food system, or food chain, is the path that food travels from field to plate. The promise of True Price is that it will help educate consumers about the negative external costs in the food chain and enable them to contribute to offsetting these costs with the goal of remedying them. Thus, significant questions examining the True Price movement are: “Does True Price effectively influence consumer behavior? Will consumers buy items with a lower true price, indicating fewer negative externalities in their production? Will consumers pay the higher true price rather than the normal retail price, thus donating the difference toward remedying the externalities?”


To answer these questions, researchers from Wageningen University & Research in the Netherlands—which specializes in the fields of health and environmental issues—interviewed two groups of consumers. They wanted to know if a consumer’s choice of a food product could be influenced by giving specific information about the item’s true price.


The first group comprised regular customers of the organic supermarket De Aanzet in Amsterdam. The second group consisted of various consumers from all over the Netherlands. They gave both groups the same information about:

  1. the true price of products, ensuring that the product stories are accurate;

  2. the redistribution of the extra funds collected, indicating that 100% would be used to remedy social and environmental ills; and

  3. how the customer would get a boost in social status by being among the first people in the Netherlands to pay the true price for products.


The researchers found that consumers in the first group, at De Aanzet, were more likely to pay the higher true price, since they were already committed to buying healthier, organic fruits and vegetables.


Nearly two-thirds of respondents were willing to pay the optional, higher true price for products under certain circumstances.

But an important result the researchers discovered was that nearly two-thirds of respondents were willing to pay the optional, higher true price for products under certain circumstances. These were: if the information was conspicuously displayed, if they trusted the information, if they thought that by paying the true price they could boost their social status, and/or if they thought that their donation had a positive social and environmental impact.


True Price coffee at Albert Heijn coffee shop, Holland.   ©Courtesy of M. Miller
True Price coffee at Albert Heijn coffee shop, Holland. ©Courtesy of M. Miller

The owner of De Aanzet, Maarten Rijninks, reports in a 2022 article in The New Yorker, that, since adopting the True Price system, business volume has increased by about 5%, and many patrons say that they like it. “The problem is that customers don’t have the tools to lower their social and environmental impact,” he told The New Yorker. “But they are willing to do it.”


Supermarket chain Albert Heijn provides an example of how the extra money donated through the True Price system is used. According to Food Matters Live, “All coffee sold at Albert Heijn’s ‘to go’ branches comes from Rainforest Alliance-certified coffee plantations, according to the retailer. If customers are willing to pay the true price of their coffee instead of the retail price, Albert Heijn says it will invest the extra money in Rainforest Alliance improvement projects in the coffee supply chain.”


Early in its history, True Price realized it could also work directly with companies, such as the Dutch chocolate company Tony’s Chocolonely, to help them reduce their negative externalities. Tony’s Chocolonely has found the True Price analysis useful in setting goals and assessing the progress of its initiatives. According to The New Yorker, the company pays higher-than-average prices for its beans, and “runs a supply-chain-traceability initiative and a child-labor-monitoring system.” It also spends 1% of its annual revenue on “investments in community infrastructure and on lobbying for better legislation regarding supply chains.”


Going Mainstream


Indeed, in 2018, True Price created a spin-off social enterprise called the Impact Institute, Powered by True Price. True Price continued as a non-profit. The mission of the new Impact Institute is to empower organizations to transform themselves and facilitate a global system shift toward the realization of the impact economy. They describe their vision as “an economy where everyday work, entrepreneurship, innovation, and technology lead to a better world.” One of the requirements for this change is to have “a common language for impact and integrating this language into every aspect of our economy.”

All services and new methods and technologies development have been spun off from True Price to the Impact Institute.

True Pricing and true cost accounting are becoming mainstream.

The Impact Institute has ongoing projects with European businesses and governments. Recently, true cost accounting was a major topic of discussion at the United Nations’ Food Systems Summit in Rome, Italy (UNFSS+2), July 24-26, 2023. In his keynote address there, UN Secretary-General António Guterres said with great urgency: “Global food systems are broken—and billions of people are paying the price.”

True Price—an idea whose time has come—is helping customers make healthy and sustainable choices easily and allowing them to contribute to a better food system. At the same time, the Impact Institute, powered by True Price, has now grown into a global social enterprise providing consulting services in the field of true pricing, with the vision of creating a better world economy for all. 

 

*Marion W. Miller is a French bilingual researcher, writer, and editor now residing in Northern Virginia. She has master’s degrees in Business and Economics, and in International Economics and Economic Development. She has also ministered for community development and world peace. As a grandmother of eight, she is deeply interested in environmental stewardship and preserving natural wonders for future generations. She has traveled to many natural sites in countries around the world and now escapes to the gorgeous Shenandoah Valley National Park whenever time allows.



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