Denim’s industry should drive up its final prices to cover the costs related to the workers’ salary or the environmental impact, according to the report The Hidden Costs of Jeans, made by the Impact Institute and Abn Amro.
Denim redifines its costs. Climate change, labour rights or the production conditions of the jeans carry additional costs, which the manufacturers tend to externalize. According to the report The Hidden Cotts of Jeans, made by Impact Institute and the financial group Abn Amro, the industry should increase the sale price to the retailers up to 33 more euros to cover these additional costs.
The document points that there is a real price gap between the difference of what retailers are currently paying and the production costs of the denim items, because the derivate costs of contamination and water consume, the non-authorized work or the child working abuse are not included.
In the denim’s value chain, the bigger costs are produced within the first phase, during the cotton crop and its subsequent processing, related to water's consume. In production’s phase, the costs that jeans’ industry assume are in connection with workers’ salary, which is traduced into a negative social impact.
In value’s chain, the biggest social costs are produced in fabric’s production stage
Along value's chain, India's cotton crop involves a cost of 4.85 euros in environmental issues and an expenditure of 3.55 euros of cost of social factors. For denim's production, Indian factories have an environmental expenditure of 5.85 euros and a social cost of 15.30 euros.
The transport cost of a pair of jeans from India to Bangladesh implies an environmental expenditure of 0.05 euros. The production of one of these items in a Bengalese factory has a social cost of 3.15 euros and an environmental expenditure of 0.15 euros. The transfer of a denim clothing item from a Bangladesh plant to an specialized shop implies an environmental cost of 0.05 euros. In all, the amount of hidden cost of a pair of jeans during all its value chain climbs to 32.9 euros.
The report states various possible solution to reduce the negative impacts derived from denim’s production. First, the document explains that the manufacturers can improve the production developing long-term measures through agreements with governments and unions organizations of each country.
The additional cost in denim’s cotton crop is worth 4.85 euros
“Real prices help retailers to establish long-term relations with their producers, to set good agreements together and to guarantee that these agreements are complied, so that a fair purchase price is paid”, explains Henk Hofstede, the reports’ promoter.
Transparency is another one of the elements that the report points as fundamental for denim’s companies. According to the document, the consumers value each time more that the corporations reveal accurately all the phases of its value chain, which is traduced in their disposal to pay a higher price for the clothing items.