We've often discussed how outsourcing lemmings generally look at just one factor, labor cost, when deciding to offshore manufacturing. In reality there are many other factors that add real, although perhaps not noted on balance sheets, costs. Cash tied up in inventory on the high seas, training, the loss of creativity, experience, and knowledge back home, and of course the pain of unexpected quality issues. A little lead paint, anyone? Most of those lemmings end up chasing low labor costs from country to country.
It turns out that environmentalists have been thrown into a bit of a quandary while noodling a similar issue. A hot issue these days among the environmentalist crowd, and yes increasingly the general public, is reducing carbon footprints, and one suggested method is to reduce transportation costs associated with food. Reduced transportation means reduced jet/train/truck emissions, thereby equaling increased karma.
Well, maybe not.
A hat tip to Cafe Hayek for pointing us to a recent New York Times (yes, really) article that analyzes the total cost of food delivery. Sounds familiar? Let's dive into a few stats from that article.
Instead of measuring a product’s carbon footprint through food miles alone, the Lincoln University scientists expanded their equations to include other energy-consuming aspects of production — what economists call “factor inputs and externalities” — like water use, harvesting techniques, fertilizer outlays, renewable energy applications, means of transportation (and the kind of fuel used), the amount of carbon dioxide absorbed during photosynthesis, disposal of packaging, storage procedures and dozens of other cultivation inputs.
Incorporating these measurements into their assessments, scientists reached surprising conclusions. Most notably, they found that lamb raised on New Zealand’s clover-choked pastures and shipped 11,000 miles by boat to Britain produced 1,520 pounds of carbon dioxide emissions per ton while British lamb produced 6,280 pounds of carbon dioxide per ton, in part because poorer British pastures force farmers to use feed. In other words, it is four times more energy-efficient for Londoners to buy lamb imported from the other side of the world than to buy it from a producer in their backyard. Similar figures were found for dairy products and fruit.
Uh, oops. That doesn't exactly support our view that the total cost of nearby in-house factories is less than offshore outsourcing. But it does show how total cost can change the perceived benefit of an activity. And in this case it is throwing the environmentalists into a bit of a brain tizzy.
These life-cycle measurements are causing environmentalists worldwide to rethink the logic of food miles. New Zealand’s most prominent environmental research organization, Landcare Research-Manaaki Whenua, explains that localism “is not always the most environmentally sound solution if more emissions are generated at other stages of the product life cycle than during transport.” The British government’s 2006 Food Industry Sustainability Strategy similarly seeks to consider the environmental costs “across the life cycle of the produce,” not just in transportation.
Environmentalists are learning a lesson in total cost. Will outsourcing lemmings be next in line?