What Are True Costs?

Understanding the full impact of our choices.

Not all costs of production are currently included in market prices.

When we buy a product, the price tag tells only part of the story. Behind the visible cost lies a hidden reality — environmental degradation, social injustices, and economic inequalities that are not reflected in the market price. This concept is known as "True Costs," and it provides a comprehensive view of the actual economic, environmental, and social consequences of production and consumption.

Why are true costs important?

1. Making environmental costs visible

Many industries contribute to environmental degradation through deforestation, biodiversity loss, water pollution, and high greenhouse gas emissions. These consequences have long-term costs for society — costs that are currently externalized and not included in the final price of products. By integrating these hidden costs into pricing, we can encourage more sustainable production and consumption patterns and strengthen sustainable business strategies.

2. Addressing Social Costs

Behind many supply chains lie harsh working conditions, low wages, and inadequate social protections. Yet, these costs are rarely reflected in product prices. Recognizing true costs means considering the well-being of workers and ensuring fair labor practices are part of the economic equation.

3. Enabling Better Decision-Making

When consumers and businesses are aware of the true costs of products, they can make more informed and responsible choices. A transparent pricing system that includes social and environmental costs empowers individuals to support sustainable business strategies and therefore gives truly sustainable company an economic advantage in competitive markets.

How can True Cost Accounting help?

True Cost Accounting (TCA) quantifies and integrates social and environmental costs into economic decision-making. By using data-driven tools such as Life Cycle Assessment (LCA), TCA helps businesses measure their real impact and take steps to reduce their footprint.

• Transparency through data: Companies can assess their sustainability performance and disclose their environmental and social impact compliant with EU sustainability regulations.

• Fair pricing for sustainable products: If all costs were accounted for, many eco-friendly products would be more competitively priced and give companies with sustainable business strategies a competitive advantage.

• Driving policy & business transformation: Governments and businesses need to embrace true cost integration to promote fair and sustainable economic systems and move along a sustainable transformation.

Your path forward — With PATOS

At PATOS, we believe that transparency and responsible business strategies and practices are key to a sustainable future. Integrating true costs into pricing and decision-making is a crucial step toward a more just and resilient economy.

What do you think? Should true costs be incorporated into pricing and economic mechanisms?

Should true costs be incorporated into pricing and economic mechanisms?

• Absolutely!
• There are better ways for sustainable transformation.
• I'm not sure guys...

If you’d like to learn more or discuss how True Cost Accounting can benefit your business, feel free to contact us.