The Sustainability Price: expanding Environmental Life Cycle Costing to include the costs of poverty and climate change

Abstract

This study develops the Sustainability Price (SP) to include social and environmental costs in the price of goods and to move towards a sustainable economy, as recommended by the UN Global Sustainability Panel. The SP addresses research gaps for integrating social and environmental values as well as computational methods in Environmental Life Cycle Costing (ELCC). A detailed case study is used to identify data sources, develop the method and consider policy applications for product labelling. An Interdisciplinary Research (IDR) methodology is used to provide a framework for methods for calculating costs to meet minimum sustainability values. Values are based on UN sustainability goals with a focus on climate change and poverty. Costs for climate change are based on the International Panel on Climate Change (IPCC) carbon price paths to avoid dangerous climate change. Costs for poverty are based on Anker’s method, which follows the UN cost of basic needs approach which is used by international institutions, national governments and ethical trade organisations. The costs are expressed as changes in value added and tracked through the supply chain using the Leontief price model. The case study uses a scoping analysis to identify important variables which are the focus of data collection and a hybrid modelling approach. Existing economic and social surveys in India captured regional and production variables for the SP. Hotspots in the production process included indirect GHG emissions for spinning and knitting processes and absolute poverty in cotton farming regions such as Gujarat. Despite wage increases of up to 200% to address absolute poverty, the SP of a T-shirt produced in India is only about 2% more than the existing price when retailed in the USA. The SP clearly communicates the costs to address poverty and climate change in global supply chains and demonstrates the use of economic methods and data sources in ELCC. The SP identifies hotspots in the supply chain and can inform labelling for ethical trade products. The SP is limited to minimum values for sustainability and does not consider optimisation. Expanding the scope to other minimum values such as planetary boundaries is recommended for further research.