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Book (series)The role of true cost accounting in guiding agrifood businesses and investments towards sustainability
Background paper for The State of Food and Agriculture 2023
2023Also available in:
No results found.This background paper to The State of Food and Agriculture 2023 describes how true cost accounting (TCA) and the lessons learned from its application can inform efforts to develop a sound economic foundation for sustainability in business and finance in agrifood systems. It looks at the current state of TCA in the business and financial sector, giving examples of different initiatives and resources available that have contributed significantly to the development of knowledge and guidance for TCA application within the private and financial sectors in agrifood systems. The paper recognises the value of drawing on the extensive groundwork that has been conducted under various TCA initiatives to develop ready-reference databases and tools for the private sector. It also acknowledges that numerous gaps need to be filled to ensure the mainstreaming of TCA. These include gaps in the standardization of methods, including indicators, impact pathways and valuation factors. Research and guidance are needed to help businesses integrate capital accounting into corporate governance, strategy and performance models. Overcoming these barriers will require coordinated efforts by different actors in agrifood systems. The great challenges of our time call for a new economic foundation for sustainability. The momentum at the international level to reform business accounting and reporting standards can support a transformation towards sustainable agrifood systems. So far, the initial success of agrifood businesses in applying and integrating TCA into decision-making shows that, given the right enabling environment, businesses can contribute to building socially, environmentally and economically sustainable agrifood systems. To achieve this transformation, however, standard-setting is needed to create a level playing field. -
Book (series)Accounting for the hidden costs of agrifood systems in data-scarce contexts
Background paper for The State of Food and Agriculture 2023
2023Also available in:
No results found.This background paper to The State of Food and Agriculture 2023 reviews the methods used, as well as the data required, to estimate the hidden environmental, social and health costs associated with agrifood systems. The studies analysed are based on the true cost accounting approach, which can facilitate improved decision-making by policymakers, businesses, farmers, investors and consumers. The reviewed studies demonstrate that hidden costs of agrifood systems are considerable, and that action is needed at global, national and local levels. To apply true cost accounting at the country level, the methods developed must be downscaled and the data limitations overcome. This review goes through each cost category – environmental, social and health – and proposes approaches to deal with them, with a focus on country-level estimates and analysis, especially in data-scarce countries. Where data are not available or time is limited, methods combining secondary data are suggested. In some cases, the suggestion is to collaborate with research centres. The paper further argues that, when addressing hidden costs in agrifood systems, trade-offs may arise, which may require the use of more complex tools, such as partial and general equilibrium models, to analyse their impacts on different areas. In general, the extent of the compromise will be minimized if there are at least as many policy instruments as there are objectives. For example, if a country seeks to restore fish stocks and address rural poverty, restricting catch alone could increase poverty in the artisanal fishing community. Adding income support, however, could allow both objectives to be met. -
Book (stand-alone)Refining national true cost accounting for agrifood systems
Considerations for moving beyond The State of Food and Agriculture 2023 and 2024
2024Also available in:
No results found.The State of Food and Agriculture 2024 report prepared by the Food and Agriculture Organization of the United Nations (FAO) considers the effectiveness of actions at global, national and local level to avoid the hidden costs estimated in The State of Food and Agriculture 2023. Expert analysis and practitioner discussion of national levers and pathways for sustainable agrifood systems led to questions of the scope of hidden costs, and the role of imported commodities or transnational air and water pollution, for national hidden cost exercises. This technical note documents some considerations on the scope of hidden costs for the purpose of informing national and subsequent hidden cost exercises. The technical note has two parts: First, a detailed discussion on additional categories of hidden costs, such as pesticide use and its impact on ecosystem services, which were not included in the earlier analysis, and how incorporating them can align with national agrifood system priorities. Second, an exploration of how hidden costs from food production and consumption, particularly from imports, can be redistributed across national borders and affect the national scope for hidden costs. The note discusses different approaches to accounting for these cross-border hidden costs and suggests national exercises could refine their scope to include costs incurred in origin countries. However, there are challenges in achieving precise national estimates due to data limitations and uncertainties. National analyses should carefully define cost-bearing scopes to improve upon The State of Food and Agriculture 2023 estimates.
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