The True Cost Equation

What something costs often dominates our thoughts about its value, and it is easy to think of costs as strictly limited to financials.

However, true cost includes factors like social and environmental impact. We recently published our product impact data to more comprehensively represent the true cost of our products. Stick with us as we dig into the details of how to determine whether or not a purchase is worth it.

Let’s start by talking monetary cost. This is something that, as a society, we understand because we deal with it every day and it directly and immediately impacts us as individuals. When we’re considering purchasing something, we look at the price tag and consider if the garment (for example) is worth the price to us. In order to be worth the price, the following must be true:

Monetary cost : monetary budget ≤ product’s potential function * actual usage

Let’s break that down.

The Left Side

Monetary cost is the same for everyone. It’s the number on the price tag. However, that number has variable impact depending on the individual, because we all have different budgets. When we look a price tag, we consider how that number fits (or doesn’t fit) into our personal budgets.

The Right Side

Once we’ve established the impact of the cost on us as individuals, we must decide if the product is worth it.   Part of this “worthiness” depends on the garment itself - its design, its materials, its construction, its durability, its timelessness, etc. I define this part of the worthiness equation as “functional potential,” with function being both physical and emotional. Beyond that, it matters how that garment will function for you in particular. Therefore, its “worthiness” also depends on your style preferences, your lifestyle, the clothes you already have, etc. We’ll call this part of the equation “actual usage.” 

When we’re making purchases, we consciously or subconsciously consider all of these factors to determine if the equation above is true.

There’s another part of the worthiness equation that often gets overlooked: the environmental cost. The production and delivery of any garment takes physical resources and has an impact on the environment. High environmental impact doesn’t necessarily mean that a product is bad or unsustainable. Low environmental impact doesn’t necessarily mean that a product is good or sustainable. Like financial cost, we have to use an equation to determine worthiness.

Environmental cost : environmenal budget ≤ product’s potential function * actual usage

The Left Side

Unfortunately, environmental cost isn’t always clearly stated in the same way monetary cost is. For this reason, it is very difficult for consumers to fully assess the true cost. This is an industry problem. We are working to change this by publishing our own estimated environmental costs (see here). Our estimated carbon emissions per product are currently listed in our wholesale workbooks alongside the monetary cost and we are working to do the same on our product hangtags.

Like a financial budget, each individual has limits on the amount of impact they (and their businesses) should have on the environment. Although this number is constantly shifting, tools from organizations like the Global Footprint Network can help us get an idea of what our limits should be. We’ll call this “environmental budget.” Unlike a financial budget, we all have the same environmental limits. However, some (individuals and largely corporations) overspend while others underspend and there are no individual consequences - only collective ones. In theory, we would all spend under our individual environmental limits (which would include any impact associated with businesses an individual owns and any impact embodied by purchases) and we could each choose how we wanted to spend our impact. Some may spend a majority of their impact on travel, while others would spend theirs on gas stoves, diesel trucks, high impact objects or a number of other options.

Although current mainstream systems don’t easily allow for this type of impact budget analysis, we can think theoretically about our relative impact on the world when making decisions that will continue having an impact, as most decisions do.

The Right Side

This side of equation hasn’t changed. Just like with financial cost, we must weigh the environmental cost against the function in our individual lives. Essentially, a product’s impact on the world should be at least proportional to the function it will serve, which depends on its potential function and individual usage, as defined earlier.

It would be naive to talk about these factors - financial and environmental - as if they’re not related to one another. However, we know that these factors are deeply intertwined. In most cases, a lower environmental cost will come at a higher financial cost and vice versa. However, in most cases, the individual financial and environmental budgets tend to cancel this out, as individuals with a greater financial budget tend to have less of their environmental budget remaining. Individuals with a smaller financial budget tend to have less of a negative environmental impact and therefore have more of their environmental budget remaining. When we put the equation all together, it’s a mouthful, but if we could all get on board, it just might work.

Monetary cost : monetary budget + environmental cost : environmental budget ≤ product’s potential function * individual usage

*Another part of this equation is the social cost. We have not included this in our equation, because we believe that social exploitation is unjustifiable no matter the product’s potential function or individual usage. We recognize, however, that this is an industry responsibility and do not place this blame on consumers. We’re working to make sure our supply chain is free of social exploitation (see here for details).

Thanks for taking the time to read, and if you have any questions, comments, or just want to chat, drop us a line below or through your preferred means of communication.