How much does a carrot cost? Say about US$3 a lb. which works out to about 6 carrots, so, let’s say half a dollar per carrot. The price of that carrot at the store is comprised (roughly) of 50% to the producer, 20% to the store, 15% logistics, and 15% to the distributor. These numbers vary widely.

We mentioned 50% that goes to the distributor, i.e. roughly US$0.25 per carrot. The farmer does this math per acre, and we can imagine that those costs work out to about 15% for seeds, 35% for fertilizer and pesticides, 24% for labor, 15% for the cost of capital, and the rest for other costs like irrigation, marketing, and other variables.

What’s not calculated in the price throughout? Rain, sunshine, pollination (sometimes), irrigation, and natural nutrients in the soil (potassium, nitrogen, phosphorus, etc.), CO2 emissions, plastics used, possible workers’ rights violations, animals harmed, etc. These are not things without a cost, it just doesn’t appear in the price. In economics, these are referred to as “externalities”.

Our financial system does not account for externalities. By design, environmental or social impact are outside of the process, they aren’t taken into consideration. By not accounting for these factors, the system incentivizes unsustainable business behaviors and creates market failures. This is why it makes economic sense to ship single-use plastic goods from one side of the Earth to the other without accounting for the life-cycle of plastic, the emissions emitted, and the rights of workers making the goods.

The current methods of dealing with market failures and unaccounted externalities are mostly through regulation and taxation (see Pigovian Tax). This is complemented by systems such as cap and trade, limits on certain materials used, etc.

Increasingly, businesses are being asked by stakeholders and governments to voluntarily create more ethical, sustainable, and transparent products and services. This leads to an alphabet soup of acronyms, metrics, standards, labels, and guidelines across industries. This demand creates an expensive challenge for companies that must implement and manage complex systems of social and environmental impact across their operations.

Think of the Impact Oracle (IO) as an evolving, live, ledger of impact accounting. The IO is a constantly updated taxonomy for the “price” of social and environmental externalities that allows businesses to connect and account for their impact seamlessly. IO serves as a “Price Oracle” for impact. Just as financial markets constantly update according to shifting prices of commodities and exchange rates, so must our market accommodate impact costs and values.

IO streamlines rewarding sustainable behavior and offsetting negative externalities in every transaction. This means only a fraction of the effort is needed to report and verify sustainability in goods and services. No need for a multitude of acronyms, all impact is priced and displayed in the transaction. Why pay for sustainability reporting when you can be paid to be sustainable?

The platform will completely disrupt the impact management and regulatory industries while offering different actors in any industry the ability to reduce their costs. It is an effective answer to greenwashing and answers the needs of everyone from small businesses to big corporations while unlocking new value to investment communities, tech, and consumers.

The IO will serve as a foundation for a new economy for generations to come. One that accounts for the true price of any good or service. This will allow our economies to grow sustainably and effectively.