And why are eco-friendly products so expensive? Answering all your questions right here.
Comparatively high costs are the first thing that blocks anyone’s endeavour of going completely sustainable. The extensive number of swaps and changes required, along with the high prices of eco-friendly products makes the process tedious. It also makes you wonder: Can sustainability & affordability go hand in hand? Is it even possible? If yes, then when?
If these questions have been stopping you from going green, don’t worry for we will try to find the answers together. Understand how products are priced, why sustainable products cost more and when can we expect them to go cheaper?
How products are priced?
Pricing a product is probably the hardest thing brands have to do. (Or that’s what multiple articles on the subject suggest.) It may seem simple since calculating price involves adding up all costs of creating the product plus a few overheads. Though several other factors are also involved. It includes competitor costs, understanding demand-supply for the product and maintaining brand image through product pricing.
We will leave out all these economic concerns for the sake of our article and focus on just the costs. Thus, the price of any product is equal to
Costs of Raw Material + Labour Charges+ Transportation & Distribution/ Delivery Fees + Marketing and Promotional Overheads + Profit Margin
These are the five broad categories that define the price tags of products around us. How we arrive at the cost for each of these is dictated by a few rules.
Rules that dictate prices
- Keeping calculations as simple as possible. This means that not getting into the finer details of calculating costs. For instance, labour charges include basic charges like labour wages, machinery and equipment costs, and infrastructure maintenance costs.
- With globalisation, the entire world is a marketplace for brands to sell. But this also means outsourcing the production process to several countries. Thus, the raw materials may be sourced from one country, manufactured and assembled in another, transported to be stored in one or more hubs and then distributed for sale in multiple locations.
- Finally, the main rule that guides everything is to keep costs as low as possible. This means selecting the factory that can provide the cheapest goods, production units that run on cheap labour, transportation facilities that won’t cost a dime and agencies that will market and sell at low prices.
The system of finding the cheapest alternative possible has been in place for so long, that we are taking it for granted. We live on the principle of ‘more for less’. With everything available at the ease of a click, we are buying more than what we have ever before.
But, the questions need to be asked: Who is paying the true cost of low-priced products? And, What is the ‘True Cost’ of the products we buy?
Why sustainable products cost more?
Sustainable products calculate and add up all the hidden costs involved in the production of a product. Eco-friendly production acknowledges the journey of a good or service. Some hidden costs that sustainable products account for include:-
1. Environmental Costs
Environmental concerns and costs play a major role in sustainable production. This is the main factor that makes sustainable products stand out in the market.
Accounting for environmental costs means calculating them each step of the way. It is all about understanding and evaluating each factor. For instance, when factoring in raw material costs several questions are asked. How much water is consumed and how much land is required? How labour intensive is the task? What is the energy source for the technology or machinery involved? How harmful is the sourcing to the environment?
Asking questions means not ignoring any step of the calculation process. It may be difficult to find answers to each of these questions. But having them noted only mean having scopes for improvement in place. Sustainable brands are also transparent about costs and reveal how the final price of a product is calculated. This means that the consumer is also aware of the questions brands ask and topics they are passionate about.
2. Human Costs
Many people think that environmental costs make sustainable products expensive. But, green product prices also include human costs. Remember- sustainability is not just about planet care but also people care.
Ensuring fair wages, safe working environments and positive work culture are equally important guiding factors in determining the price. Sustainable brands often highlight who made their products and the stories of all the people involved. This helps brands show care towards their employees and also gives access to consumers into the making process.
3. Life Cycle Costs
Finally, the third most important cost that eco-friendly products include is the life cycle cost of a product. Sustainability and the concept of less waste generation go hand in hand. Creating a circular economy means thinking about what happens at the last stage of the product life cycle. It means asking, how to dispose of products in an environment-friendly way?
Many sustainable products often come with eco-friendly disposing instructions. Remember, ‘Reusable costs more than disposable’ and ensuring a biodegradable end for products will mean some extra costs involved.
Thus concepts like a fair trade, ethical production process, and environment-friendly sourcing of raw materials have become the norm when it comes to selling and branding sustainable products. When accounting and including so many factors, the costs are bound to be high compared to the environmentally harmful alternatives available cheaply in the market right now.
But, Can Sustainability & Affordability ever go hand in hand?
Presently, factoring in all the hidden costs makes sustainable products costly than say plastic or non-biodegradable alternatives. When it comes to sustainable purchases, you are paying for ‘Quality over Quantity’ and quality goods cost more.
But, in the future when sustainable products become the norm instead of just a trend, the demand will increase and bring down the prices of goods. An increase in demand and how beneficial sustainable products are for the environment can also mean tax exemptions and benefits from the government in the future. Though pinpointing when exactly is that going to happen is still a guessing game.
As for how you can contribute to bringing in a change? Switch and buy sustainable products. Individual purchases mean increasing demand. If you leave it up to someone else to purchase eco-friendly products, and you don’t help at any chance you get, there will simply not be enough people to get the job done. Eco-friendly products will stay at the same heightened price and toxic products will continue to rule the shelves of all department and online stores.
Take control over your purchasing power, don’t pass the buck for someone else to do it. Individual actions have a compounding effect and it holds great power in bringing prices down.
Sanjoli is currently working as a Content Strategist and has a Master’s degree in Fashion Journalism. She has contributed to publications like MensXP, Mindless Mag and Sustain: The Mag in the past. Conscious Charcha is her way of learning more about sustainability and spreading the word about a sustainable lifestyle.