True Cost Accounting for Sustainable Food Systems

True cost accounting is a powerful tool for making sustainable food systems a reality. It involves assigning a monetary value to the environmental and social impacts of food production, processing, and consumption.

By accounting for these externalities, businesses and consumers can make more informed decisions about the food they produce, buy, and eat. This can lead to a reduction in greenhouse gas emissions, water pollution, and deforestation.

A key aspect of true cost accounting is considering the long-term consequences of food production methods. For example, monoculture farming can lead to soil degradation and loss of biodiversity, while regenerative agriculture can help sequester carbon and promote ecosystem services.

True cost accounting encourages businesses to internalize the costs of these externalities, making sustainable practices more economically viable.

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True Cost Accounting is about assessing the true costs and benefits of different food production systems.

These costs often go unaccounted for, but we're paying for them in hidden ways, such as through water charges that include the cost of removing pesticides in drinking water.

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Many of our food production systems have damaging impacts on the environment, animal welfare, and public health.

These hidden costs can also be seen in taxes that fund environmental clean-up costs and the cost of healthcare for diet-related disease.

We're often deferring these costs onto future generations or other countries, as is currently the case with climate change, soil degradation, rainforest destruction, and species extinction.

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The Agrifood Evaluation Framework is a crucial part of true cost accounting, helping to identify and measure the costs of food production and consumption. Developed by the TEEBAgriFood initiative, it's designed to make these costs visible and inform decision-making.

Multiple capital accounting (MCA) is another term used to refer to this framework, which includes natural, human, social, and produced capitals. This approach enables us to explore the complex connections between food systems, humans, and the environment.

The TEEBAgriFood Evaluation Framework is a tool that can be used to guide policy reforms and drive food system transformation. It's a powerful framework for making the true costs of food production and consumption visible.

Organizations like the World Business Council for Sustainable Development, the Global Alliance for the Future of Food, and the Sustainable Food Trust have also initiated TCA studies and reports to research the potential of true cost accounting to transform agrifood systems towards sustainability.

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True Cost Accounting (TCA) is a powerful framework for making the true costs of food production and consumption visible. It integrates economic, environmental, and social factors to reveal the full impact of food systems.

TCA is not just about accounting for costs, but also about valuing both positive and negative externalities. This includes environmental degradation, public health impacts, and social inequities.

The true cost of food production is estimated to be much higher than the market price. For example, the European Nitrogen Assessment estimated that the costs of nitrogen fertilizer-related damage range is as high as €320 billion, or up to €750 per person every year throughout the EU.

TCA helps policymakers, businesses, and investors make more informed, responsible decisions that drive food system transformation. It encourages a shift away from damaging inputs and towards regenerative practices that use natural methods to fix nitrogen in the soil.

Here are some key types of capitals that TCA aims to measure:

By recognizing the true cost of food production, we can make more sustainable choices and drive food system transformation.

Implementing True Cost Accounting requires a deep understanding of the external costs associated with food production. This includes calculating carbon footprint emissions, water scarcity, biodiversity, soil fertility, and pesticide use.

To calculate carbon footprint emissions, we need to know the amount of diesel used per kilogram of crops, which can be specific to the farm's operations. Generic data from databases like the EF database can be less accurate than specific data.

Carbon footprint emissions from N2O caused by fertilizers are a significant source of global warming. The required data and calculation for this are described in the Datasheet Fertilizers.

Water scarcity caused by irrigation is a complex issue, especially when it comes to 'blue' water originating from groundwater or surface water. If the amount of blue water used by the farm is known, the calculation is simple.

Biodiversity and soil fertility depend heavily on farm management. Required data for biodiversity include geographical location, number of vascular species per km2, meters of hedges and scrubland around farmland fields. For soil fertility, we need data on harvested product per ha, % SOM in the top 15, 30, and 60 cm, and how often cover crops or crop rotation are applied.

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Pesticide use is another important factor, and since the fraction that resides in the harvested product is not known within a reasonable accuracy, it's best to measure the amount of pesticide in the products at the retailer and multiply it by the eco-costs given in a table.

Here are some of the required data and calculations for True Cost Accounting:

True cost accounting is a powerful tool for making hidden costs visible. It helps policymakers, businesses, and investors make more informed decisions that drive food system transformation.

Food systems are complex and shaped by economic, ecological, and social forces. By identifying and measuring externalities, TCA can help us understand the true price of food.

A short film called "The Tale of Two Chickens" illustrates how we're paying a high price for food in hidden ways. This film highlights the need for true cost accounting in our food and farming systems.

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The concept of True Cost Accounting has a rich history that dates back to the 1920s, when economists Pigou and Marshall first explored the idea of externalities.

Externalities refer to indirect costs or benefits that affect uninvolved third parties as a result of another party's activity. This concept has been around for decades, with monetary values being assigned to externalities in various contexts, such as industrial accidents.

The term True Cost Accounting is an expansion of cost-benefit analysis, which has been used in various forms since the 1980s and 1990s, with terms like full cost accounting conveying similar concepts.

Systems thinking and holistic thinking are integral parts of the True Cost Accounting approach, acknowledging that economic systems are complex and rely on multiple capitals, including natural capital, social capital, human capital, and produced capital.

The Future of Food is a complex and interconnected system shaped by economic, ecological, and social forces. Food systems often hide the true costs of production and consumption, including environmental degradation, public health impacts, and social inequities.

True Cost Accounting (TCA) is a powerful framework that makes these costs visible by identifying, measuring, and valuing both positive and negative externalities. TCA is not a new concept, but rather an expansion of cost-benefit analysis that acknowledges the complex nature of economic systems with all its interdependencies.

The TCA approach sets itself apart from its predecessors by incorporating systems thinking and holistic thinking, recognizing that economic systems rely on multiple capitals, including natural capital, social capital, human capital, and produced capital. This approach tends to include a dozen or more indicators selected to measure and value positive and negative impacts across the environmental, health, social, and economic domains.

A study on organic rice production in Thailand measured and made visible its hidden costs and benefits, identifying options for stimulating sustainable rice production in the long term. Another study compared the external costs associated with genetically modified and organic corn production in Minnesota, USA.

The true cost accounting approach has been related to food and agriculture, with recent advancements in mainstreaming the values of biodiversity and ecosystem services into decision-making. The Economics of Ecosystems and Biodiversity (TEEB) initiative aims to address the core theoretical issues and controversies underpinning the evaluation of the relationship between the agrifood sector, biodiversity, and ecosystem services, and the impacts on human health on a global scale.

By transitioning from industrialized bio-industry to organic farming, the eco-costs of food can be reduced considerably, and drastic improvement of social labor conditions in the developing world is required for a sustainable world.

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