Researchers say that retailers should actually pay 33 euros more for a pair of jeans, to take into account hidden expenses such as damage to the climate and workers' rights.
‘True price gap’
The Impact Institute and Dutch bank ABN Amro have been investigating the production chain of a pair of jeans: from cotton plantations and weaving mills in India through sewing workshops in Bangladesh to transportation to the European selling markets. Based on that, they calculated the 'true price gap', which could be described as the difference between the purchasing price that retailers pay and the actual total cost of production, including environmental costs and the impact on (local) society. These costs, such as pollution, water use and illicit labour practices (such as child labour and unpaid overtime), are not currently being paid.
The graph reveals that the 'true price gap' for a pair of jeans is almost 33 euros, or put differently: based on current production methods and wages, the purchasing price should be 33 euros higher than it is now, to compensate for all of the direct social and environmental damage that was caused along the way.
1/3 environmental, 2/3 social costs
The heaviest external costs are caused during the growing of cotton and processing it into denim. Over half of the external costs in cotton production are environmental, having to do with the use of scarce water and the pollution of the precious liquid. In the production of denim and of jeans, social external costs are highest. In India, the main cause is widespread forced labour, child labour and underpayment throughout the entire value chain.
In turn, the production of jeans out of denim in the sewing workshops in Bangladesh entails social costs in the form of intimidation and underpayment of the employees. Per pair of jeans, these external costs are fairly low due to the limited time spent during this phase of production. Remarkably, the costs of transportation are negligible in the overall picture.