With costs estimated as a percentage of net revenue to do things right, and a way to set minimum wages based on local cost of living
Prompted by a recent New York Times article, Les Szabo, Dr. Bronner’s Chief Impact & Strategy Officer and primary architect of the Purpose Pledge program, recently wrote a provocative blog critiquing billionaires who are walking back their “Giving Pledge” to donate half their wealth. Les challenges the flawed premises that allow billions to be accumulated at the expense of workers and the Earth in the first place—and argues that philanthropy alone cannot address the systemic inequalities and environmental damage at the heart of our global economic system. Reimagining capitalism to serve all stakeholders, not just shareholders, as Purpose Pledge does, offers a genuine blueprint and path forward.
Paying the True Cost of Business or “Internalizing Externalities”: The Core Idea
Another way to think about multi-stakeholder capitalism, and Purpose Pledge, is that we are seeking to fully internalize the negative social and ecological “externalities” conventional business practices impose onto society and the planet. Historically, business has opposed progressive environmental and social regulation at every turn. Yet today, products already reflect the increased labor costs of minimum wage and overtime laws, as well as the compliance costs of various environmental regulations.
In the Purpose Pledge context, we asked: what are the ultimate goals we should aim to internalize—or include—in product manufacturing and pricing in order to create the equitable, just, and sustainable global society we all want to live in? We then voluntarily translated those goals into our commitment areas and ultimately into our cost and price structures, while also modeling a template for eventual government regulation.
The primary externalities are well established. Paying poverty wages forces workers to rely on food stamps, housing assistance, emergency rooms, and other taxpayer-subsidized programs. Ecologically, the way we farm and produce food and agricultural raw materials—saturated with chemical pesticides, herbicides, and fertilizers—is a primary driver of climate change and ecosystem and public health collapse worldwide, generating enormous costs through wildfires, drought, and extreme weather events.
Purpose Pledge addresses these through three interconnected commitment areas:
- Living wages, defined in partnership with Living Wage for Us, incorporated initially into primary company operations with the eventual goal of extending to co-manufacturers and intermediate supply chain steps, especially for larger companies.
- Regenerative organic certification of supply chains, addressing soil health, animal welfare, and fair pricing and wages at the farm level.
- Climate action via a self-imposed annual Climate Transition Budget based on assessing an “internal carbon fee,” resonating with the idea of a carbon tax, developed in partnership with the Change Climate Project.
We recognize both individual and collective determinants of health. Fair trade and regenerative practices benefit not only the health of people, land, and animals within farm ecosystems, but also the larger ecological and community contexts that are otherwise being systematically poisoned and disrupted by chemical-intensive agriculture and poverty prices and wages.
Ballpark Cost Estimates: What Does Internalizing These Externalities Actually Cost?
Getting to brass tacks: what do these commitment areas cost a business in terms of net revenue percentage? The following estimates are approximate and indicative, not definitive, drawn from what we’re observing across the sixteen consumer product companies that have joined Purpose Pledge.
Importantly, Purpose Pledge gives companies nine years to achieve the various commitment areas, allowing them to gradually incorporate and increase costs over time without major disruptive shocks to retail price points.
Climate Action (~1% of net rev)
Initial greenhouse gas inventories covering Scope 1, 2, and 3 emissions, multiplied by the eventual $25/MT carbon price target at Year 9, result in a Climate Transition Budget (CTB) equal to roughly 1% of net revenue for most consumer packaged goods (CPG) brands, with a probable range of 0.5x–2x.
Critically, in the Purpose Pledge framework, the price premium paid for regenerative organic ingredients over conventional forms counts toward the CTB, but is capped at 75% of the total CTB. For example, if Dr. Bronner’s has a CTB of $2 million and is paying $10 million in regenerative organic premiums, we can cover 75% of the CTB ($1.5 million) with those premiums—but at least $500,000 must still be deployed annually in other hard-dollar climate-mitigating investments that contribute to lowering emissions over time, such as:
- Electrifying operations
- Increasing post-consumer recycled content
- Lowering the carbon intensity of packaging
- Investing in high-integrity offset projects beyond the company’s value chain
Once a CPG company has converted its major raw material supply chains to regenerative organic, the effective annual CTB spend—after counting the organic price premium—is currently estimated to be roughly 0.25% of net revenue on average, again with a probable 0.5x–2x range depending on pricing strategy, crop types, and other variables.
We take this approach because choosing regenerative organic over conventional agriculture is not only hugely beneficial for the climate, but also for ecosystem and human health in many other ways. There are examples of prominent organic brands reverting to conventional sourcing after acquisition by larger CPG parent companies, and it makes no sense to allow companies to claim climate leadership through spending in more peripheral areas while neglecting their most impactful lever: converting conventional, chemical-intensive, major raw agricultural supply chains to regenerative organic.
This analysis makes the compelling case: Determining organic versus conventional food emissions to foster the transition to sustainable food systems and diets.
Regenerative Organic Sourcing (~10% of net rev)
This is the largest cost premium for CPG companies, but also the most impactful. Assuming agricultural raw materials represent approximately 30% of net revenue—roughly half of Cost of Goods Sold—for a vertically integrated CPG brand, and using a conservative 50% price premium for all-in delivered cost of regenerative organic versus conventional ingredients, the regenerative organic premium works out to approximately 10% of net revenue for companies making multi-ingredient products.
The math: 20% × 1.5 = 30%; 30% − 20% = 10%.
The range is probably 0.5x–2x, with premiums higher for single-ingredient unprocessed products like pasture-raised beef, fruits, and vegetables versus multi-ingredient products with more processing steps.
Dr. Bronner’s is an example of a company that started conventional and is now fully Regenerative Organic Certified—a transition that took approximately seven years across all major supply chains. As more Regenerative Organic Certified (ROC) ingredients come online in quantity, driven in part by the initial cohort of Purpose Pledge brands, it will become easier and faster for subsequent companies to tap into pre-existing, already-scaled ROC supply chains.
It’s also worth noting that ROC certification requires fair labor, fair wages, and fair trade pricing criteria to be met, alongside next-level soil health and pasture-based animal welfare criteria. If a company is already organic but not fair trade, then moving to ROC will generally involve roughly a 5% premium on delivered cost of materials. Multiplying the 30% of ROC COGS above in terms of net revenue percentage by the 5% fair trade premium means about 1.5% of net revenue is related to fair trade and labor premiums.
So for an organic brand not yet fair trade, going fully ROC as part of Purpose Pledge, figuring an average additional cost of about 1.5% of net revenue for fair trade and labor premiums is a reasonable ballpark.
Living Wages (~1% of net rev)
For vertically integrated brands doing their own manufacturing in-house, with significant numbers of frontline production and warehouse employees, the aggregated “living wage gap” is approximately 1% of net revenue, which companies have nine years to close. Closing this gap involves a combination of raising base cash wages and introducing new benefits like childcare reimbursements. The probable range is again 0.5x–2x depending on company size, workforce composition, and existing compensation structure.
It’s equally important to emphasize the business case for paying living wages: attracting and retaining talent, reducing turnover, and building a strong company culture. For much more context on the Purpose Pledge approach to living wages, see my prior blog. Dr. Bronner’s is already a certified living wage employer under the separate Living Wage for Us program.
The Total Picture
Adding regenerative organic premiums, living wage gaps, and Climate Transition Budgets together, the ballpark total cost of internalizing these externalities is approximately 12% of net revenue for an average vertically integrated CPG company entering Purpose Pledge that is not already certified organic or fair trade, with a probable range of 5–20% depending on ingredient crop types and pricing strategy. While a 12% price increase would preserve the absolute dollar margin for a CPG, to keep the same relative 40% gross profit, prices would need to increase on average by 20% in terms of net revenue, with a corresponding range of 8% to 33%.
For a company coming into Purpose Pledge with certified organic but not yet certified fair trade supply chains, add another 1.5% cost in terms of net revenue to cover fair trade and labor premiums. Adding that to the 0.25% Climate Transition Budget cost and the 1% aggregate living wage gap means about a 2.75% average overall cost increase in terms of net revenue percentage, with a range of 1.5% to 5.5%. To preserve a 40% relative margin, that would mean passing through roughly an average 4.6% price increase, with a range of 2.5% to 10%. And in all cases, companies have nine years to build these costs gradually into their operations and price points in order to meet their Purpose Pledge commitments.
For a company coming into Purpose Pledge that has already certified major supply chains as both fair trade and organic, what remains is 0.25% ongoing annual cost or spend in terms of net revenue for the CTB, plus an average 1% gap to a living wage. That means about a 1.25% overall cost increase in terms of net revenue percentage, with a range of 0.75% to 2.5%. This would mean a corresponding overall price increase of about 2.1%, with a range of 1% to 4%, in terms of net revenue to preserve relative margin.
Other Purpose Pledge commitment areas generally carry no significant hard costs. Zero waste—which is somewhat of a misnomer, meaning over 90% of waste diverted from landfill—is a good example. Many companies realize operational efficiency savings and identify new income streams that effectively counter any costs incurred in the process of advancing circularity and reducing waste within their operations.
A Note on Packaging
Packaging, especially plastic packaging, represents another significant externality, as plastic waste contributes to tremendous health and ecosystem impacts globally. The goal is packaging made from materials ideally derived from waste or renewable inputs that are either infinitely recyclable or fully biodegradable or compostable at end of life.
So far this has proven practical and scalable only for a limited number of products given shelf stability challenges, but innovation is ongoing and breakthroughs are hopefully coming. In the meantime, meaningful approaches exist to reduce plastic use, increase plastic recovery, and otherwise encourage circularity, including:
- Non-plastic refill SKUs in paper-based carton, aluminum, or glass
- Packaging-free bulk programs with retailers
- Plastic neutrality certification programs that would ideally pay fair-trade collectors to recover plastic waste
Dr. Bronner’s pilot approach to taking responsibility for our plastic emissions runs approximately 0.25% of net revenue and has expanded our fair trade supply chain operation. Supporting extended producer responsibility legislation—such as California’s Plastic Pollution Prevention and Packaging Producer Responsibility Act—is also critical.
Purpose Pledge will soon build out a policy and advocacy arm to formally lobby for measures like these, alongside supply chain integrity, living wages, and related progressive policies.
Read more here: How We’re Addressing Our Plastic Use | Dr. Bronner’s
Living Wages: Exciting Progress and Depressing Setbacks
On the global front, there is genuinely exciting momentum. During a recent visit to Vietnam, I spent time with Van Ly, co-founder of Raise Partners and board secretary of the American Chamber there, who is working on living wages in apparel and aquaculture supply chains.
This connects to the Roadmap to Living Wages being managed by IDH in partnership with a coalition of NGOs, including Living Wage for Us—our Purpose Pledge catalyst partner—and companies working to define living wages around the world based on detailed cost-of-living breakdowns covering housing, food, childcare, and more for a typical family in a given region.
Major European companies like Unilever and Nestlé are engaged in the context of the EU’s Corporate Sustainability Due Diligence Directive (CSDDD) and Corporate Sustainability Reporting Directive (CSRD). Patagonia, as usual, is also leaning in and leading, and their recent sustainability report is particularly impressive, breaking down living wage progress and gaps across all major suppliers with a clear commitment to closing them in partnership with others over coming years.
I’ve had my critiques of both Unilever and Nestlé in the context of our exit from B Corp over uncertified supply chains, but I genuinely acknowledge that this living wage work is important. The proof, of course, will be in execution.
I also want to note our deep disappointment about Unilever spinning off Ben & Jerry’s in a way that effectively eviscerates its social mission under new Magnum ownership. We have been actively supporting Ben Cohen in his mission to buy Ben & Jerry’s back and restore its independent board and social mission.
The Farm Worker Crisis: A Depressing Backslide
On the domestic front, the situation is a disaster. Through mass deportations, the U.S. farm labor pool has been dramatically reduced. In response, the Trump administration has proposed a massive expansion of the H-2A foreign guest worker program while simultaneously slashing H-2A wage rates, effectively depressing wages for domestic farm workers as well. The United Farm Workers sued the Trump administration in November, and demonstrations have been held across the country.
UFW is currently grappling with the painful revelation and betrayal of Cesar Chavez’s rape and sexual abuse of girls and women in the movement, including co-founder Dolores Huerta. Led by President Teresa Romero, the organization is taking responsibility rather than shirking or rationalizing, and it remains critically important for people to support its mission in this moment, when farm workers need advocacy and champions the most.
In the context of the Regenerative Organic Alliance’s process of defining farm wage requirements at bronze and silver certification levels, I asked Michelle Murray to compare two-thirds of a full family living wage—the hourly amount that 1.75 working adults need to earn to support a family of four, two-thirds of which approximates the cost of living for a single adult with a roommate and no children—against the old and new H-2A labor rates across the lowest cost-of-living rural counties in each state.
The finding was striking: setting a wage floor at the cost of living for a single adult with a roommate and no children, in the lowest-cost counties within a given state, aligns well with the old H-2A rates that farmers were already accustomed to paying—and would represent a practical, defensible minimum fair living wage at the farm level.
See spreadsheet analysis here.
A Vision for Minimum Wage Policy
More broadly, I look forward to a day when the frameworks we’ve developed through Purpose Pledge translate into federal and state minimum wage policy. Specifically: minimum wages set at the county level using the Living Wage for Us methodology, anchored to the lowest cost-of-living county within a one-hour commute of a given workplace.
Workers would receive two-thirds of the full family living wage in their first year of employment, progressing to the full family living wage by year five of tenure. This latter goal is something we would build toward once we get the base minimum wage approach established.
I published a blog years ago on localizing minimum wages based on cost of living. We can now update that vision with Living Wage for Us’s interactive map, which provides actual cost-of-living calculations by county across the country.
Oakland/Alameda County in California is a useful example: the recent “$30 by 2030” campaign there equates to approximately $27 in today’s dollars, adjusting for inflation, which aligns exactly with two-thirds of the $40/hr full family living wage shown on the Living Wage for Us map for Alameda County.
As you scroll over other counties, multiply the displayed family living wage by two-thirds for a sense of what a county-calibrated minimum wage would look like—corresponding to the cost of living for a single adult with no children sharing housing with a roommate. This is intuitive, practical, and grounded in actual data.
Oregon already has a three-tier minimum wage structure—urban $16.30, suburban $15.05, rural $14.05—but it is not based on actual cost-of-living calculations. County-level living wage anchoring is simply the next logical step. Scrolling over Portland/Multnomah County shows a full family living wage of $30/hr, two-thirds of which is $20/hr; lower-cost counties show $27/hr, two-thirds of which is $18/hr.
Hand in hand with moving to significantly higher minimum wages calibrated to actual cost of living, I also think minimum wages should be defined on an “all-in” basis—counting bonuses and benefits, not just base cash wages. A decent benefit package often adds over $5/hr for regularly offered benefits like health insurance and a 401(k) match. Adding additional low- to no-cost benefits through pretax FSA structures often pushes the savings to workers that can be credited to a living wage to well over $8/hr.
Living Wage for Us already provides a convenient interface for inputting benefit values and converting them to a per-hour equivalent, making this calculation straightforward. And where base cash wages are set higher, workers get that much closer to the full family living wage off the bat, especially once any decent benefit package is added.
Closing Point
The main point I want to leave you with is this: consumer products produced in 2026 already internalize many social costs that didn’t exist a century ago, before the New Deal. Purpose Pledge maps and prices in the remaining externalities, adding roughly on average 12% of cost in terms of net revenue for a standard, non-organic, conventional agriculture-based consumer goods company entering the program, with a probable range of 5–20%. To preserve relative margin, the price increase CPGs would pass through would average around 20%, with a range of 8–33%.
A company with organic supply chains already in place but not yet certified fair trade would be looking at approximately 2.75% overall increase, with a range of 1.5% to 5.5%, in costs as a share of net revenue, covered by an average 4.6% price increase, with a range of 2.5% to 10%, to preserve relative 40% margin. These costs can be phased in gradually over nine years under Purpose Pledge.
For a company coming into Purpose Pledge with both organic and fair trade certifications already in place for major raw materials, the average overall cost increase would be about 1.25%, with a range of 0.75% to 2.5%, in terms of net revenue. That translates to a price increase of about 2.1%, with a range of 1% to 4%, to preserve relative 40% gross margin.
It’s also important to note that price premiums for packaged organic foods are generally lower than those for whole unprocessed fruits and vegetables, which typically run around 50%. Pasture-raised meat, dairy, and eggs can easily double that.
And for good reason. Factory farming of chickens, for example, often involves Cornish Cross genetics engineered for rapid weight gain, resulting in broken bones, organ failure, and lives spent barely able to move in confinement. Their best day is their last. A bird on pasture, by contrast, fulfills its instinctual behaviors—pecking, foraging, eating insects—without antibiotics or growth hormones. Under ROC certification, Cornish Cross breeds aren’t permitted at all.
Confined systems for pigs and cows are often just as grim. Conventional dairy is brutal in ways that go largely unseen, and male dairy calves contribute roughly 20% of the U.S. beef supply.
To raise livestock in a truly ethical and regenerative way is to integrate them into pasture cropping systems, rotationally grazing in ways that build soil fertility naturally. Just as wild ecosystems sustain a balance of animal and plant life, farming ecosystems can too. But it requires reducing livestock populations, ending confinement, and returning animals to the land responsibly.
The higher price of meat, dairy, and eggs from farms operating at this level naturally encourages people to consume animal products less frequently and more intentionally, which is good for the Earth and for our own health. These price signals help drive the necessary global shift toward more plant-forward, less meat-intensive diets, and set the right incentives to get there. Plant-based and alternative proteins rooted in regenerative organic agriculture need to be part of this transition as well.
As a vegan for 30 years, I have deep appreciation for ethical omnivores who maintain largely plant-based diets and make exceptions only for meat, dairy, and eggs produced at the highest standards. My blog Regenetarians Unite, which helped inform the launch of the Regenerative Organic Alliance with Patagonia, Rodale, and other allies, explores all of these dynamics in much greater depth.
If we were to produce and consume this way globally—paying living wages throughout supply chains and primary operations, while farming and manufacturing ecologically—the natural world and our body politic would be dramatically healthier. That improved health would translate into substantial reductions in healthcare spending, housing assistance, food assistance programs, and climate-related disaster costs, likely washing out the premiums entirely.
The savings from pricing in externalities around health, farming, climate, and social stability most likely net out once you do the full math, especially when accounting for the chronic disease burden driven by overconsumption of animal products.
These are premiums more and more consumers are already willing to pay to help create the conditions for a just and flourishing world. People routinely pay far more in luxury brand premiums tied to nothing more than shareholder returns and inflated executive bonuses.
And in parallel, the living wage movement will enable more consumers to choose regenerative organic foods for their families and the planet—foods that, at real scale, will be produced far more efficiently than they are today.
Eventually, I believe what Purpose Pledge is doing voluntarily will become mandatory through progressive social and ecological policy and government regulation, notwithstanding the current administration. Europe’s supply chain laws mandating living wages and ecological responsibility for large multinationals are a sign of things to come in the U.S. and hopefully elsewhere.
In the meantime, we’ll keep building the model, expanding the coalition, and working with allies to translate what we’re learning into durable policy change.
This piece is intentionally approximate and back-of-envelope in its estimates. Much more sophisticated analyses should and will be done as Purpose Pledge membership grows and business schools engage with real interest in quantifying and studying these commitments as case studies. We look forward to learning from that scrutiny.