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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. -
Policy briefRevealing the hidden costs of agrifood systems to enhance their value 2023
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Agrifood systems are invaluable to society. However, they also contribute to climate change and natural resource degradation while failing to provide healthy diets to all. Many of these impacts are not included in market prices and are thus hidden. True cost accounting (TCA) allows estimating the hidden costs and benefits of agrifood systems, providing decision-makers with the evidence needed for their transformation. A national-level TCA assessment for 154 countries reveals that global quantified hidden costs from agrifood systems are highly likely to exceed 10 trillion dollars, revealing the urgent need to factor these costs into decision-making. These new estimates are a first step in raising awareness and should be followed by more targeted TCA assessments. -
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.
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