How to Calculate Your Merch's True Environmental Cost

The most obvious cost associated with company merchandise is the cost of making it. When you purchase raw materials, have them manufactured into a product, have your branding and design printed onto it, have it shipped, and fulfill orders, there's a lot of money involved. These are obvious costs.

There are also secondary, external costs. One of the biggest is the set of costs associated with the environment.

We talk a lot about green production, eco-friendly raw materials, and sustainable manufacturing. But how can you tell what impact your merchandise has, and how can you measure improvements you make? After all, it's not like every shirt you order comes with a receipt showing the carbon emissions and water consumption used to make it.

Unfortunately, while there are a lot of different ways to estimate this kind of impact and even assign monetary values to it, there's very little feedback about it. How much financial impact, how much cost, is there to CO2 emissions? How much monetary damage does a transatlantic container ship do, and how much of your one small section of one small container contribute?

There are a few ways you can try to perform these calculations, so let's talk about them and the considerations you should keep in mind.

The EU's True Cost Calculator

The first option is to try using the European True Cost Calculator.

This calculator is one of the most advanced ways you can calculate the hidden costs in environmental and sustainability arenas. It asks you for information about the apparel you're calculating, and then it uses its extensive database of information to identify and calculate:

• The impact of garment manufacturing for the product.
• The impact of the production of the fabric used.
• The impact of fiber and yarn production.
• The impact of distribution and retail for the product.
• The impact of the life cycle of the product.
• The impact of the end-of-life phase for the product.

Most of this information comes from the True Price Foundation's calculations. This foundation uses big data analysis to identify different kinds of environmental and social damage, and assigns a monetary value to them.

Where does the monetary value come from? It's not arbitrary. It's a measurement of how much money it would cost, using currently available methods, to remediate the damage by an equivalent amount. If the production of a batch of shirts releases 5 lbs. of carbon into the atmosphere, the foundation calculates the cost it would take to remove 5 lbs. of carbon from the atmosphere.

This foundation cross-references the Ecoinvent database for information and uses the ReCiPe 2016 methodology to assign specific values to specific items.

Environmental impact goes beyond just carbon emissions, too. They consider:

• Global warming
• Ionizing radiation
• Ozone formation
• Fine particulate emissions
• Terrestrial acidification
• Freshwater and marine eutrophication
• Terrestrial, freshwater, and marine ecotoxicity
• Carcinogenic toxicity in humans
• Non-carcinogenic toxicity in humans
• Land use
• Mineral resource scarcity
• Water consumption

And more. In other words, they look at every item from as many different perspectives as possible.

On top of all of this, they also examine products from a social lens. The environment isn't the only area of concern, after all; we're also concerned about the people who live within that environment. So, the calculator also considers factors like the labor used to manufacture the garment, the cost basis of the tools used to make it, the overall social impact, and more. Fair wages, health and safety, child exploitation, gender discrimination, and freedom of association are all calculated.

The data you can get from this calculator is incredibly revealing. However, there are two major downsides to this specific calculator.

The first is that it's mostly aimed at individuals. It's designed for a person to put in information about their wardrobe and see their own personal impact, as well as look for ways they might improve their overall damage profile.

That's not too bad of a hurdle, though. If your business orders 1,000 shirts, you can put in information for that shirt, and then just multiply the figure by 1,000. Maybe there's some "bulk discounts" to the damage, but it's a close enough equation.

The other major downside is that it's fully focused on garments. That's fine if your company merch is all apparel, but what if you have other kinds of products? Umbrellas, battery packs, sunscreen in branded containers; all of these have their own costs, but they aren't garments, so they don't fit in the calculator.

Three-Scope Emissions Calculations

If you want to examine your company's merchandise through a more individualized lens, you can look at it through the three-scope model developed by Arbor.

What are the three scopes?

Scope 1 is direct emissions. These are emissions caused by your company directly. If you have an office or a factory, the direct emissions from these facilities are your direct emissions. This doesn't really apply to your merchandise if you're not making it yourself, but you might calculate some of it if you're storing your merchandise in-house.

Scope 2 is emissions from the energy you buy. Heating, electricity, and other energy used in your business facilities fall into this scope. After all, even if you're not the one generating the electricity (and who among us generates our own?), that energy comes from somewhere.

Like scope 1, scope 2 emissions are difficult to attribute to your merchandise directly, except in cases where it's obvious, like the costs to power a storage facility.

Scope 3 emissions are all of the other associated emissions. Emissions from goods you purchase, emissions from transportation and fulfillment, emissions from end of life for products; it all falls into this category.

The Arbor paradigm is more useful at a business scale than the True Cost Calculator because it's aimed specifically at businesses. However, it's not as useful for calculating your merchandise's impact, because it focuses on your business as a sum entity, rather than your merchandise specifically. You'll have to segment, subdivide, and break down the costs to more accurately attribute them.

You can read more about how this method works here.

Alternative Frameworks and Equations

While we've talked about two of the bigger frameworks used for calculating the true cost of business and merchandise, you can already see how they might not apply to your specific situation.

There are many others available, though:

• The German True Cost Accounting Model
• The True Price Movement
• The RealReal Sustainability Calculation Model

The problem you'll generally run into is the extent and limitations of these kinds of calculations.

What do you include? How far down the supply chain do you look? How do you divide the costs of a subcontractor across other clients? How do you account for the changing costs of raw materials and different production methods?

These aren't easy questions to answer.

How Accurate Are These Calculations?

When you're looking at a calculator that considers all of these different factors and assigns a value to you, you have to ask: How accurate is the information?

This isn't an easy question to answer.

The simpler the calculation is, the less accurate it's likely to be. On the other hand, the more complex it is, the more areas there can be where data isn't accurate to your situation, and the score slips out of alignment.

The truth is, there's no easy way to validate how accurate these kinds of calculations are. They aren't really for that kind of purpose, though. They actually exist more so that you can find areas where there is some sort of stand-out impact you can focus on reducing.

Is It Important to Know Your True Environmental Cost?

How valuable is it to know the "true cost" of your merchandise?

It might not be as useful as you might think.

Outside of certain regulatory environments, such as certain European countries that mandate at least some estimate of cost on their tags, having precise values isn't all that valuable. It serves as much to fuel guilt as it does accountability. Unfortunately, feeling bad about it doesn't reduce or fix the damage.

There are two good reasons to calculate these costs.

The first is if you're using it as a benchmark, and take tangible steps to reduce those costs year over year. Your merchandise will always have some kind of cost; there's no way to avoid it while still existing in an environment, but by measuring it, you can take steps to reduce it moving forward. You can also identify areas where it comes in under or over average, and focus on improving those specific areas.

The second is as a form of accountability. When you use a complex framework to calculate the overall costs of your company merchandise, you can then use that figure and invest an equivalent amount of money in offsetting your impact. Whether it's buying carbon credits ( not recommended), donating to environmental organizations, or putting an equivalent budget into improvements locally or globally, you can use that number as a form of accountability and balance the books.

Focus On Improvements, Not Perfection

The fact is, we live in a deeply interconnected society, where one product can have a thousand different costs across a hundred different axes and half the world over.

Trying to calculate every last iota of carbon, every last ounce of water, every hour of labor, every calorie of food for farm animals, it all gets you so deep in the weeds that you end up just wasting time and effort.

In some areas, there are regulations to show at least some of the costs of making an item. That may or may not even necessarily apply to you, specifically; it might apply to the garment maker, not the vendor printing and reselling it.

Beyond that, though, are these costs that are worth knowing? In general, sure, but with deep accuracy, maybe not.

One aphorism comes out on top in this discussion. Don't let perfect be the enemy of good.

To put it simply, there is no way to live in a modern globalized society without doing some kind of damage to the environment. A business operating in this world will always generate emissions, will always have costs, and will always fail to meet the "ideal" across some of these areas.

In our view, the goal is improvement, where improvement is possible.

That's how we operate our business. We look for suppliers that focus on some area of improvement over the norm for a given area of environmental impact. Whether it means shifting to a new cotton fabric supplier, a new manufacturer for shirts, or a new printing method, we make changes when we find new options.

To us, that's the essence of how we progress towards a more ethical and sustainable society. It's not about personal responsibility. It's not about achieving some perfect ideal of zero-carbon, environmentally-neutral operations. For that matter, neutrality isn't even the end state. Improvement is always possible.

That's why we always strive to improve when we find avenues to do so, and why we exist as an avenue for other businesses to improve. Examine your current merchandise, and think about the impact it has. Then look at ours, and see if it comes out ahead. If it does, consider switching over. If not, let us know, and we can look into yet more improvements ourselves.

The simple fact is that, with so many different factors, influences, and calculations to keep in mind, and so many different ways it can all be variable, trying to pin down specific dollar values just isn't useful. You'll end up spending more time trying to massage the numbers than it's worth.

Seek out real improvements, along any metric that you can access. Compare apples to apples, calculations in the same way, and pick the better options. It's all any of us can do, but the more we all do, the better everyone will be.