Obstacles in the sharing of costs and benefits are mainly in the high price of sustainable products, the mismatch of individual and collective interests and the shadow of unsustainability.
Labelled foods are expensive, bulk products cheap
Products with certificate labels are relatively expensive. A kilogram of organic chicken breast is sometimes a factor of four more expensive than regular chicken, while the additional cost that the farmer has to spend is not so much higher. One major cause is that organic broilers are slaughtered and processed separately, which is logistically less efficient and more expensive. In addition, certification itself costs money. Finally the square valorisation (‘vierkantsverwaarding’) plays a role: with limited space on the shelf, only chicken breast is offered, because consumers prefer it. Because the drumsticks then have to be sold at a much lower price abroad, the extra cost of organic production has to be earned on the breast, which thus becomes more expensive. In contrast, non-certified products are often kept as cheap as possible, because suppliers and supermarkets compete heavily on price. This mechanism creates pressure on farmers’ income, limited investment opportunities and negative impacts on the environment.
Reinders, M. J., Poppe, K. J., Immink, V. M., van den Broek, E. M. F., van Horne, P. L. M., & Hoste, R. (2013), p. 2, 14-15.
Individual and collective interests
Individual motives for sustainability do not always correspond with the collective interest. Not all sustainability themes are equally popular. While many companies dare to invest money in welfare improvements, collective problems as global biodiversity, land use and nutrient cycles receive less attention. There is also the risk that companies themselves do not participate actively, but still reap the benefits of sustainability (free-riding). Enforcement from the government is thus important. Finally, it is not always clear to what extent consumers value the investments made in sustainability, or are prepared to pay a higher price, however much it is in their interest.
PBL (2013), p. 90-91.
The real price of (un)sustainability
Environmental economists consider damage to environmental sustainability, health, animal welfare or labour conditions externalities. That is to say that the mostly negative (adverse) effects of production or consumption are not included in the price of the product. An example is CO2 emissions, which without regulation could increase indefinitely, to the detriment of future generations affected by climate change. Besides government intervention, companies can also choose to include the externalities of their production in the consumer price and to take measures to mitigate or compensate them.
True Price, Deloitte, EY & PwC (2014), p. 5-7.
Also see Carolan, M. (2013).
