How it works

When making clothes, various costs come into play, such as the price of fabric, wages for workers, and transportation expenses. These are the internal costs that you see reflected in the retail price of a garment. 

But did you know there are also costs that aren’t included in that price? These are the environmental and social impacts associated with producing and wearing the garment, often referred to as external costs, because they aren’t paid by producers or consumers. 

What does the True Cost Calculator do?

The True Cost Calculator (TCC) is a tool that reveals the real societal costs of a garment, both environmental and social. It does this by converting these "invisible" external costs into a monetary value, giving you a clear picture of what a garment truly costs over its entire lifecycle. The difference between the retail price and this "True Cost" is known as the True Cost Gap.

The TCC helps you understand where these costs come from and how they are broken down. For instance, it shows which stages of production cause the most harm and where the biggest improvements can be made. The longer a garment is worn, the lower the True Cost per wear will be.

How does the monetization happen? 

There are various ways to determine the societal costs of an environmental or social impact. The TCC builds on the True Price Foundation’s monetization approach. This method calculates what it would cost to remediate or repair the damage done to the environment or to the people working in the industry, to a state at least as good as if the violation had not occurred. 

These remediation costs are categorized into four types (restoration, compensation, prevention and retribution) and combined to determine the total remediation cost for both the environmental (1) and the social (2) impact.

1. The environmental dimension

To calculate the environmental impact, we follow the principles of the life cycle assessment (LCA) methodology. We ask users to provide data about the entire lifecycle of a garment, from production over use to disposal at the end-of-life. This data is then linked to a large LCA database called Ecoinvent, and then translated into environmental impacts by the ReCiPe 2016 life cycle impact assessment method.

When a user lacks specific information about a certain aspect of the  lifecycle, the TCC uses default industry data to fill the gaps. 

Each process or product is translated into environmental impacts spread over various categories: 

• Global warming
• Ionizing radiation
• Ozone formation, human health
• Fine particulate matter formation
• Ozone formation, terrestrial ecosystems
• Terrestrial acidification
• Freshwater eutrophication
• Marine eutrophication
• Terrestrial ecotoxicity
• Freshwater ecotoxicity
• Marine ecotoxicity
• Human carcinogenic toxicity
• Human non-carcinogenic toxicity
• Land use
• Mineral resource scarcity
• Fossil resource scarcity
• Water consumption
• Land use occupation

Each of these categories is given a price tag, allowing us to calculate the total environmental footprint of a garment. By standardizing all impact categories into a single unit (euro), we can bring everything together into one total value for the environmental externalities. 

2. The social dimension

To calculate the social impact of a garment, such as the working conditions in the countries where the clothes are made, the TCC makes an impact assessment based on country and industry specific data. 

The tool assesses each life cycle stage (e.g. the manufacturing process) on a cost-basis, by looking at the cost share of that stage in the total life cycle and at the estimated number of worker hours (based on the average amount of working time needed to generate 1 euro of output). This number is specific to each country and sector and is currently derived from PSILCA (Product Social Inventory Life Cycle Assessment) version 3, a social life cycle assessment database. The database provides an overview of social performance or risks, structured in impact (sub)categories, countries and sectors, and is based on a global economic input-output (I/O) model. 

Using this cost basis, a parameter was developed to express the social external cost per euro of financial output generated in a country and sector for all relevant social impact categories. The social part of the True Cost of a garment is calculated by multiplying this parameter for each life cycle stage by the economic cost of that stage. Part of these economic cost data are provided by the user, while others are derived from industry average data. Literature based, average cost breakdowns across phases are also applied when the user is not able to provide this detailed breakdown himself. 

To identify the most relevant and critical social impact categories for the apparel sector in the TCC, a poll was conducted among SCIRT partners and Advisory Board members. Based on their experience in the textiles industry, they selected the five most pressing social impact categories from the PSILCA v3 database: fair salary, health and safety, child labour, forced labour, gender discrimination and freedom of association.

Currently, the social dimension considers a limited selection of countries with a significant share of textile related activities. The list of countries will be expanded in the future based on user feedback and additional research.

Whenever possible, the True Price impact areas are linked to the corresponding PSILCA v3 impact categories. However, in many cases, the PSILCA-data was either outdated or incomplete. To address this, additional and more recent data sources were consulted, including data from the ILO, IMF, WageIndicator, and others. Unfortunately, for the impact category ‘Freedom of association and collective bargaining’, accurate data were not available. This will be implemented once suitable data becomes available.

Surveys overview 

Click on the tiles below to learn more about the different surveys we use in the calculator.