What Are Environmental Costs (AKA Eco-Costs)

As humans, everything we do has an impact or “cost” to the environment. 

Yet when we buy a product, we’re often not paying for these hidden environmental costs. We’re simply paying the sales price. 

The concept of ‘eco-costs’ places a monetary value on the environmental costs of a product. 

In other words, it’s the ‘price’ nature and society pay to produce a product – representing the product’s full impact on the environment. 

So let’s explore:

• What are eco-costs?
• Why is it important to know your eco-costs?
• What are impact categories? (using Pickler’s methodology)
• How do we calculate eco-costs at BioPak?
• How can companies reduce their eco-costs?

Eco-costs are a way to understand the impacts of human actions on the planet. 

They’re the environmental costs that are not yet reflected in the market price of a product. When added to the sales price, they’d make up a product’s ‘true costs.’

Consider the formula:

Sales price + eco-costs = true costs.

Eco-costs serve two main purposes.

1. They allow businesses to measure the environmental impact of a product (in monetary value), and in turn, businesses can compare products and make sustainability improvements.
2. They show prevention costs – the price we'd need to pay to invest in impact reduction measures.

Eco-costs are one of the many ways we can measure our social and environmental impact (and then work to reduce it). 

By measuring eco-costs, we can reduce pollution and the depletion of natural resources, allowing us to return to sustainable levels that align with the earth's carrying capacity. 

When using Pickler’s software, eco-costs provide a rounded view of a product's impact on the environment using four key categories: carbon footprint, impact on biodiversity, impact on human health and impact on material scarcity (more on these next). This avoids becoming ‘tunnel-visioned’ and focusing solely on carbon footprint. 

Done correctly, eco-costs would allow companies to charge customers a fee that combines the product price and the eco-costs. The eco-cost portion could then be reinvested back into the four impact categories to help mitigate the product’s adverse effects. While it’s a beneficial concept, it isn’t common practice in today’s world.

Working with Pickler, BioPak can calculate, compare, and lower the eco-costs of our packaging products – helping us realise our mission and transition to a more sustainable future.

Pickler is an environmental impact calculation software for the packaging industry, dedicated to making sustainable decision-making at scale - as easy as possible. Enabling us to make impact calculations for 100s of our products. 

Using Pickler’s software, BioPak includes carbon footprint data and eco-costs in each product description on our website. This increases transparency, accountability and our commitment to combating greenwashing. 

Pickler’s software looks at the environmental impact at every stage of a product’s lifecycle, including raw materials, production, transport, and finally disposal.

Partnering with Pickler’s software, there are four key impact categories (requested by EU legislation like the CSRD). These categories are carbon footprint, impact on biodiversity, impact on human health, and impact on material scarcity. 

Using multiple categories helps to discover a product’s complete impact on the environment – and then take action on the biggest impact categories.

Pickler software uses a Life Cycle Assessment (LCA)-based method – a type of methodology that looks at the environmental impacts throughout the entire life cycle of a product – including all the energy and materials needed across the industry value chain. 

Now, let’s explore each of the impact categories in more detail.

Greenhouse gas emissions (like carbon) trap heat in the Earth’s atmosphere, leading to global warming. This changes the Earth's local, regional, and global climates, having devastating social, environmental and economic impacts. Carbon footprint is a metric we use to measure this impact. 

A product’s carbon footprint refers to the total greenhouse gas emissions released into the atmosphere as a result of all the activities completed to create that product (across the entire life cycle). This is expressed in CO2-eq (CO2 equivalent) – a metric that translates all greenhouse gases into the equivalent amount of carbon dioxide. 

Learn more about Carbon Footprint here.

This impact category measures how a product disrupts biodiversity. The term ‘biodiversity’ refers to all different kinds of life on earth – plants, animals, fungi and bacteria. Biodiversity works together to create ecosystems, a community of interconnected living organisms. 

Yet unfortunately, economic activities to create products, like deforestation and pollution of soil, water and landscapes, can negatively impact biodiversity, and in turn human health.

This impact category covers how the creation of a product can affect human health, specifically in relation to diseases. For example, products can create air and noise pollution or emissions, which can be linked to health issues like asthma, hearing loss, dehydration, and heart disease.

Material scarcity refers to our need and dependency on current and future raw materials. Through this impact category, we measure the rate at which we're depleting our current resources to create products, and how this can affect the health of soil, water and biodiversity. For example, if we over-exploit resources like forests, this can lead to a loss of biodiversity and soil erosion.

Businesses, like BioPak, can use eco-costs to uncover the biggest impact categories for a product – and which part of the product's lifecycle caused it (for example, it might highlight the problem with certain production processes or raw materials). This is called 'impact hotspots' – showing businesses exactly where they can reduce their impact. For example, "How can I best reduce the carbon emissions in my packaging's material phase?"

Eco-costs need to show the total environmental impact across all four impact categories.

It’s a complex calculation as it asks the question, how can we convert carbon footprint, resource scarcity, impact on biodiversity and impact on human health into the same ‘metric’ or a simple figure? 

Because when you calculate the impact of a product with the Life Cycle Assessment method (LCA), you get different results for each impact category that you can analyse seperately. In Life Cycle Assessment language, these impact categories are called ‘midpoint indicators’.

We can look at these midpoint indicators individually (for example, looking at the impact on climate change). But adding them up to see the total impact isn't possible – they all have different formulas. 

That’s where the monetary values from the eco cost system come in. 

The eco-cost system used in Pickler is created by the foundation Sustainability Impact Metrics (a spin-off of the Technical University of Delft). It adds a monetary value to each midpoint indicator, allowing us to add up the values into 4 main categories and, in return, add these up to get the total environmental cost of a product. The result is a single figure or ‘cost’ to show the impact. This is more beneficial than using indicators on their own – for example, carbon footprint on its own is a valuable metric, but it often falls short as it doesn’t show the full picture. 

Having an eco-cost allows us to compare the total impact of products, including the ‘true cost’ and the price we’d need to pay to invest in actions to reduce it. 

The method behind the eco-costs model is illustrated here.

Note: The eco-costs system complies with ISO 14008 (“Monetary valuation of environmental impacts and related environmental aspects”) and uses the ‘averting costs method’, also called ‘(marginal) prevention costs method’.

Measuring eco-costs is just the beginning. The next step is even more important – to take positive steps to reduce the eco-costs of products and services. 

By having clear and accurate data, BioPak can scrutinise our value chain and manufacturing processes, and then take actions to address the eco-costs of our products. This will help us create a more sustainable operation, while also improving financial performance and competitiveness. 

At BioPak, here are five ways we can use our ‘true costs’:

1. Better decision-making: By knowing the full range of social and environmental costs associated with our products, we can make more informed decisions about how to allocate resources, manage risks, and keep innovating new materials for sustainable packaging.
2. Improved stakeholder relations: ‘True costs’ can help us identify and engage with stakeholders who are impacted by our operations, including local communities, customers, and suppliers. By understanding and addressing the full range of costs associated with our activities, we can build stronger relationships with these stakeholders.
3. Regulatory compliance: Some regulations require businesses to account for and report on their social and environmental impacts. ‘True cost’ accounting will help BioPak to comply with these regulations and avoid penalties or fines.
4. Cost savings: By identifying inefficiencies and waste in our operations, we can reduce our costs and improve our profitability. ‘True cost’ accounting can help to identify these opportunities by providing a more complete picture of the costs associated with our products.
5. Innovation and competitiveness: ‘True cost’ accounting can help us identify new markets and opportunities for innovation by identifying unmet social and environmental needs. By addressing these needs, we will continue to differentiate ourselves and lead our industry.

Compost Connect is an initiative that speaks to better decision-making, innovation and improved stakeholder relations. 

Before launching Compost Connect, we recognised that the best end of life solution for our products is composting. However, large-scale industrial composting services are not always readily available in the areas we operate in. 

Compost Connect is a not-for-profit composting platform connecting foodservice businesses to commercial organic waste pick-up services. Through Compost Connect, we’re helping to lift composting rates, divert waste from landfill and incineration, promote the growth of composting infrastructure, and educate businesses and end consumers about the value of composting.

Eco-costs are one of the many ways we can measure our environmental impact (and then work to reduce it). 

We urge more companies and industries to jump on board and embrace transparency. By doing so, you’ll uncover areas where you can reduce your ‘true costs’ and allow consumers to make informed purchase decisions. 

Think about it. If companies embraced the ‘eco-costs’ concept and reinvested funds back toward the necessary impact category, our world would be a better place.