Published April 22, 2022 | Version v1
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Oiconomy Pricing: RVO Pilot Project Report

Creators

  • 1. Copernicus Institute of Sustainable Development

Description

  • In this project the Oiconomy Pricing method has been applied by 3 companies on one of their products (pepper, a  stone kitchen countertop and a pack heater). They calculated the hidden cost for all sustainability aspects in the full value chain (planet, people & prosperity). Hidden costs are calculated as prevention costs, representing costs of avoiding negative externalities. As far as possible this calculation is based on the actual performance data of the main partners in the supply chain. First tier suppliers collaborated in these calculations. The results instruct the supply chain partners in key points for improvement.
  • These hidden costs are € 32,44 for 1m2 of  stone kitchen countertop,  € 130,21 per pack heater (medical device) and  € 1,03 per pepper jar.
  • The absence of child labour could not be demonstrated in the clay and felspar mines in Turkey and Ukraine and neither on the pepper farms. This led to the allocation of € 0,12 per 1m2 kitchen countertop and € 0,004 per pepper jar,  in order to mitigate child labour. Additionally, child labour takes place in the supply-chain of steel production costing € 6,88 per pack heater to mitigate.
  • Within the supply chain of a pack heater, it was found that the employees working in steel workshops earn 53% beneath the fair minimum wage. Raising their salaries results in an allocation of € 25 per pack heater.
  • The Oiconomy Pricing method also rewards positive externalities,  when they are not reflected in the market transaction of selling the product. The positive externalities in the case studies are € 6,89 per m2 natural stone kitchen countertop, € 17,65 per pack heater and € 0,89 for pepper.
  • The pilot companies evaluated the Oiconomy Pricing approach as a very useful tool to analyse their supply chains and to open a dialogue with their suppliers on specific improvement options on various sustainability aspects.
  • The experiences of the participating companies show that the Oiconomy Pricing method is a useful innovation in the field of corporate sustainability performance measurement. It goes beyond the traditional practice of LCA of product by integrating all sustainability aspects (PPP), and presenting it in monetary terms with a focus on prevention.
  • The Oiconomy Pricing method is in the starting phase of market introduction. The pilot version of the assessments tool has been refined, based on the feedback and experiences. 

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Additional details

References

  • Croes, P. R. (2021). Comprehensive in-supply chain life cycle assessment of the preventative cost-based externalities of products. An assessment methodology as first step to a sustainable and responsible true price economy: " Oiconomy". PhD thesis, Utrecht University, Utrecht
  • Croes, P. R. and Vermeulen, W. J. V. (2021) 'The Assessment of Positive Impacts in LCA in general and in Preventative Cost-based LCA in particular. A contribution to the Oiconomy Project', Int. J. Life Cycle Assess, 2021, 26(1), pp. 143–156
  • Croes, P. R. and Vermeulen, W. J. V. (2019) "Quantification of corruption in preventative cost-based S-LCA: a contribution to the Oiconomy project," Int. J. Life Cycle Assess. 24(1), pp. 142–159.
  • Croes, P. R. and Vermeulen, W. J. V. (2016a) 'In search of income reference points for S-LCA using a country level sustainability benchmark (part 1): fair inequality. A contribution to the Oiconomy project', Int. J. Life Cycle Assess., 21(3), pp. 349–362.
  • Croes, P. R. and Vermeulen, W. J. V. (2016b) 'In search of Income Reference Points for S-LCA using a Country Level Sustainability Benchmark (part 2): Fair Minimum Wage. A Contribution to the Oiconomy project', Int. J. Life Cycle Assess., 21(3), pp. 363–377.
  • Croes, P. R. and Vermeulen, W. J. V. (2015) 'Life Cycle Assessment by Transfer of Preventative Costs in the Supply Chain of Products. A first draft of the Oiconomy system', J. Cleaner Prod., 102, pp. 178–187.