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ABN AMRO report

Actual cost of organic cauliflower much lower than for conventional produce

Pass the negative impact conventional cauliflower has on the environment through to its price, and this price ends up being much higher than that of its organic counterpart. This is according to a practical case in ABN AMRO's True Cost Accounting report. Nine out of ten Dutch people think that over the next five years they will have to pay more for groceries in order to save the environment. Only a minority, 37% of consumers, firmly believe in this. However, 50% of people are willing to pay for sustainably produced fresh fruit and vegetables.

ABN AMRO tasked PanelWizard to do research among 2.065 consumers. Currently, the price consumers pay for food does not take "social costs" into account. Consumers, producers, and supermarkets are unaware of these hidden costs. These costs include factors such as CO2 emissions and the decline of biodiversity surrounding agricultural fields.

There is a growing awareness that the environmental impact of food production needs to be reduced. This ever-increasing awareness means True Cost Accounting (TCA) is receiving more interest. This is according to ABN AMRO's latest report. TCA discloses both a company's positive and negative impact on the environment. By expressing this impact in monetary terms, it becomes more clear which products cause pollution.

Consumers want extra costs to ensure increased sustainability in supply chains
ABN AMRO expects TCA's importance to increase significantly over the coming five years. "TCA is still being developed. However, we view it as an important way to place an economic value on a food product's positive and negative social effects. These products can then be weighed up against each other. Polluting products will receive a higher price tag on balance. This makes them less attractive. This higher cost can be directly passed on to the supermarket price. It can also serve as a 'shadow price'. Based on this shadow price, farmers, processors, and supermarkets can enter into discussions. These talks can be to formulate concrete actions to create sustainability", says Rob Morren, ABN AMRO's Sector Banker for Food.

"TCA offers all parties the opportunity to make well-considered production and buying choices. Consumers are, however, still reluctant to pay more for less sustainable products. They want to be sure that the extra costs they are paying will actually be used to create more sustainability. They do not want them to be used to increase the profit margins of parties in the chain."

Click here for the True Cost Accounting report

Source: ABN AMRO

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