Wednesday, July 10, 2013

Pricing Carbon Costs Into Retail Products

Some of my recent research is leading me into unexplored territory.  I blogged about how businesses can learn about Sustainable ROI and I've been hunting for data that will make such a calculation viable.  Calculating returns means adjusting gross revenues and eventually earnings for the true price of things like carbon use.  Energy producers can use carbon credits to price their emissions but pricing consumer goods is probably more difficult.  The EPA even has a Social Cost of Carbon (SCC) that finance professionals can use as a discount rate for carbon's contribution to a project's NPV.  That covers the whole enterprise.  The individual retail product is another matter.

The UK's Carbon Trust has confirmed through research that consumer demand exists for low-carbon products.  On the other hand, the Economist notes that pricing retail products for carbon is difficult.  I believe Big Data can close the gap between an unmet consumer demand and the inability of business to quantify that demand.

The Consumer Goods Forum members have the ability to identify the input cost of every factor in the consumer goods value chain through its Sustainability Pillar.  The National Retail Federation is the Big Data aggregator for finished goods sales and demand trends.  Put the two together and I bet something magical will happen.  More specifically, the carbon price of finished retail goods will be within reach of marketers who can mine retail data through several lenses.  The final touch will be an app shoppers can download while they browse store aisles that will help them search for goods with low carbon prices.

Come on, retailers.  This golden opportunity awaits the first consumer products maker that can dig into its supply chain and leverage the data mining of the two organizations I mentioned above.