For the first time, in 2024, The State of Food and Agriculture builds on the previous year’s edition, which quantified the preliminary global hidden costs of agrifood systems using true cost accounting (TCA) – a systems approach that captures the environmental, social, health and economic impacts, both visible and invisible, of agrifood systems. Using publicly available data for 154 countries, The State of Food and Agriculture 2023 revealed that the global hidden costs of agrifood systems were highly likely to have exceeded 10 trillion dollars at purchasing power parity (PPP) in 2020. This preliminary figure would probably be even higher without the data constraints preventing the quantification of several relevant hidden cost components for those 154 countries. A notable finding was that global hidden costs are largely driven by health hidden costs, followed by environmental hidden costs, in upper-middle- and high-income countries. Social hidden costs from poverty and undernourishment are predominant in low- and lower-middle-income countries.
Against this backdrop, global visions for transforming agrifood systems are on the rise. Such transformation requires a deeper understanding of national agrifood systems and their hidden costs to identify clear policy levers. Consequently, The State of Food and Agriculture 2024 refines the global estimates presented in the 2023 edition, providing a detailed breakdown of the health hidden costs for 156 countries, and moves forward, including targeted TCA assessments through case studies. Targeted TCA assessments enable stakeholder consultation and the identification of policy levers needed to address the main drivers of hidden costs, and are, therefore, a fundamental precondition to successful transformation on any scale.
GLOBAL QUANTIFIED HIDDEN COSTS OF AGRIFOOD SYSTEMS
Revising and refining the 2023 estimates
The quantification of hidden costs in the 2023 edition of this report amounted to 12.7 trillion 2020 PPP dollars in 2020, of which more than 9 trillion (or 73 percent) were due to health-related costs. Because of the overwhelming share of health hidden costs associated with dietary patterns that lead to obesity and non-communicable diseases (NCDs), this 2024 edition makes three refinements to their quantification. First, it drops the hidden costs of high body mass index (BMI), as this can be driven by factors other than agrifood systems. Second, the health hidden costs of diets high in sugar-sweetened beverages are added, whereas these were previously excluded to prevent double-counting with BMI. Third, health hidden costs are now broken down into dietary risk factors associated with NCDs from the Global Burden of Disease study to help identify more tangible policy levers.
With these refinements, the new quantified hidden costs amount to 11.6 trillion 2020 PPP dollars for 156 countries globally, with health hidden costs decreasing by around 13 percent to 8.1 trillion 2020 PPP dollars, but remaining equivalent to 70 percent of global hidden costs, confirming the 2023 edition’s conclusions that urgent strategic action is needed. Breaking down these results by dietary risk associated with NCDs, this report finds that diets low in whole grains are of concern (18 percent of global quantified health hidden costs), alongside diets high in sodium and low in fruits (16 percent each), although there is significant variation across agrifood systems.
An agrifood systems typology to identify context-specific policies
To facilitate policy recommendations better suited to specific contexts, this report analyses quantified hidden costs through the lens of an agrifood systems typology covering 153 countries with six categories – protracted crisis, traditional, expanding, diversifying, formalizing and industrial. A set of four variables, comprising agricultural value added per worker, number of supermarkets per capita, diet diversity, and urbanization, was used to create this typology, which has been shown to have strong correlations with a number of indicators relevant to sustainable agrifood systems transformation.
Industrial and diversifying agrifood systems make the highest contribution to global quantified hidden costs (adding up to 5.9 trillion 2020 PPP dollars), dominated by health hidden costs linked to NCDs. These health hidden costs also account for a significant share of the total quantified hidden costs of other agrifood systems, except for those in the protracted crisis category.
Presenting hidden costs as a share of gross domestic product (GDP) gives a sense of the burden placed on the economy. In this respect, the burden of hidden costs is highest in countries in protracted crisis (47 percent of GDP) and those with traditional agrifood systems (23 percent of GDP), with social hidden costs being particularly important. The burden of hidden costs decreases as agrifood systems transition towards industrial (6 percent of GDP), as does the relevance of social hidden costs.
The burden of health hidden costs associated with NCDs is largest in the diversifying category (10 percent of GDP) and decreases as systems transition towards formalizing and industrial categories. This pattern reflects the dietary transition that accompanies structural transformation. The decreasing share of health hidden costs in GDP in formalizing and industrial systems also reflects higher financial and institutional capacity and better health systems to address the burden of NCD-related health hidden costs, as well as the rise in demand for healthier diets as incomes increase.
The dietary risk factors associated with NCDs driving health hidden costs are also highly diverse across systems, so breaking them down can help gain insights into potential levers. Diets low in whole grains are the leading risk in all agrifood systems categories, except for protracted crisis and traditional systems. In these two categories, diets low in fruits and vegetables prevail, although these are also relevant in other categories. Diets high in sodium are also problematic and show an increasing pattern as agrifood systems transition from traditional to formalizing, where they peak and then decrease for industrial agrifood systems. Diets high in processed and red meat, in contrast, increase consistently as agrifood systems transition from traditional towards industrial, where they feature among the top three dietary risks.
CAPACITY OF AGRIFOOD SYSTEMS TO IMPLEMENT TRANSFORMATIVE ACTIONS
Countries’ capacity to take transformative action will depend to some extent on their institutional and fiscal space, as well as their supply chain structures and food environments, which vary widely across the agrifood systems typology.
Countries and territories in industrial and formalizing agrifood systems categories have the most resources available for repurposing government support towards safe, nutritious diets with sustainable and inclusive food production and consumption patterns. These categories also boast the highest government effectiveness index scores – that is, the overall capacity of governments to enact transformative policies – and highest level of social protection coverage.
Diversifying systems face significant challenges due to low government effectiveness and fiscal space. Out of all agrifood systems categories, diversifying has the highest burden of health hidden costs as a share of GDP. Furthermore, 27 percent of the population living in these countries cannot afford a healthy diet, indicating that in addition to dietary risks leading to NCDs, they also face the burden of malnutrition leading to child stunting and wasting. Countries in this category require policy action specifically targeting the different types of dietary risks faced, as well as the affordability of nutritious food.
Countries and territories in protracted crisis perform worst on most agrifood systems indicators, with particularly low levels of government effectiveness, agricultural support, social protection coverage, fertilizer use intensity and rural electrification. In these countries, social and environmental hidden costs stand out (averaging 18 percent and 20 percent of GDP, respectively). This is likely due to the vicious cycle of social and environmental stressors and conflict. While short-term agrifood systems interventions in such situations may focus on food aid, medium- to long-term actions to address environmental stressors, poverty and social inclusion can be a first step towards agrifood systems that can break this cycle.
Stakeholder engagement and scenario analysis to address the quantified hidden costs of agrifood systems
National stakeholder consultation is needed to assess the plausibility of the quantified hidden costs (including of targeted assessments), acknowledge and potentially fill data gaps, and contextualize the challenges based on national priorities and commitments. Scenario analysis, including simulations of alternative futures, is another fundamental tool in informing policy actions in targeted assessments. This report commissioned six country case studies by the Food, Agriculture, Biodiversity, Land-Use and Energy Consortium – Australia, Brazil, Colombia, Ethiopia, India and the United Kingdom of Great Britain and Northern Ireland. These case studies, representing different types of agrifood systems according to the typology introduced in this report, combine scenarios (based on stakeholder consultations) with TCA of the hidden costs of their agrifood systems.
Three scenarios were assessed in each country: i) the current trends scenario with a low-ambition vision of feasible actions towards sustainable agrifood systems, strongly dependent on current policies; ii) the national commitments scenario reflecting the actions needed to meet existing national commitments and targets; and iii) the global sustainability scenario corresponding to efforts compatible with achieving global sustainability targets.
The stakeholder consultations identified nationally relevant variables that would have to change to increase the sustainability of their agrifood systems. These variables included improvements in crop and livestock productivity, reduced stocking rates (ruminant density) on pasture, and decreased post-harvest losses in all countries. Preventing deforestation and increasing afforestation are included in the national commitments and global sustainability scenarios. Other variables considered by some countries include changes in trade, biofuels, agroecological practices and irrigation. Dietary changes for healthier consumption patterns are also seen as a key factor.
The results of the scenario analysis show significant variation from country to country in terms of which of the modelled outcomes is the most effective in reducing the hidden costs of agrifood systems. Drawing on the agrifood systems typology, however, an interesting pattern can be observed. For the majority of the agrifood systems studied in the industrial and transitional categories, changing dietary patterns is not only the main means of decreasing quantified health hidden costs, but also a very effective way of reducing the quantified environmental hidden costs by freeing land, reducing and sequestering greenhouse gases (GHGs) and reducing nitrogen emissions.
The role of stakeholder consultation in identifying nationally relevant levers was particularly evident in a Swiss Government-backed study. One of the most important enablers of this process is the existence of a national commitment to agrifood systems transformation. The results provide an initial validation of the hidden costs quantified in The State of Food and Agriculture 2023 and indicate that national-level assessments of the same hidden cost components fall within the uncertainty bounds of the 2023 assessment for Switzerland. The refined and amended hidden cost estimates send a relatively simple message: key entry points for agrifood systems transformation could focus on addressing dietary patterns, biodiversity loss and GHG emissions.
The importance of stakeholder participation is also evident in the application of The Economics of Ecosystems and Biodiversity (TEEB) AgriFood Evaluation Framework in several countries, which offers further examples of combining a consultative scenario-building process with TCA. It adopts a comprehensive strategy for policy intervention for agrifood systems transformation. Following a scoping stage to collect documentary insights, identify stakeholders and conduct a preliminary evaluation of policy interventions, policy mapping is conducted to pinpoint pertinent policies and their governing mechanisms. Pilot projects are subsequently devised to serve as models for policy intervention scenarios. Lastly, communication and outreach initiatives are undertaken to enhance awareness and comprehension of the significance of integrating the (hidden and visible) values of nature into government decision-making and education.
A closer look at who bears the highest burden of agrifood systems hidden costs
The core actors whose decisions depend on and affect the value provided by agrifood systems range from input suppliers and producers, through processors and wholesalers, to retailers, food service providers and consumers. The decisions of one actor at one point in time in one location have implications for actors in another time or location. Consumers may not see the value of improving fertilizer use efficiency on farms that produce their food in another region or country, for instance. Similarly, producers of highly processed food may not see the value of changing their product compositions if associated hidden costs are borne by society at large and mostly in the future.
As the disconnect between the producers of hidden costs and the cost bearers grows, the benefits to society and the planet of transforming agrifood systems become less visible. This gap can be impossible to bridge if the damage occurs in the distant future or abroad. The inequalities on multiple dimensions (for example, socioeconomic, gender and generational) between who benefits from producing hidden costs and who bears those costs are one of the key challenges of transforming global agrifood systems. The role of governments and intergovernmental organizations is particularly important in cases where international or intergenerational transfers are needed to address these inequalities.
An estimated 1.23 billion people are directly employed in agrifood systems, bringing food to our tables by way of food supply chains. While agrifood systems provide employment around the world, they do not always provide an acceptable standard of living and quality of life. In fact, too often, vulnerable populations are left behind across agrifood systems, for example, the poor and food insecure, small-scale value chain actors, migrants and refugees, women, children and youth, persons living with disabilities, and Indigenous Peoples. These groups bear the greatest burden of the social hidden costs of agrifood systems.
The informality of agrifood operations also presents an overlapping set of challenges for agrifood systems transformation. While informal or semi-formal activities serve as the main source of revenue and income for many vulnerable segments of society, they can preserve poor working conditions (such as unofficial employment contracts) and not comply with food safety and hygiene regulations.
Producers are on the front line of agrifood systems transformation
To bring about change effectively, the concept of a living income, or living income benchmark, can be useful. It refers to the net annual income required for a household in a particular place to afford a decent standard of living for all members of that household. The discrepancy between the living income benchmark and actual earnings is particularly notable in the food and agriculture sector, with figures ranging from 50 to 94 percent for the typical smallholder farmer household. The living income perspective is an important one, because a successful agrifood systems transformation must recognize the unique position of producers: they are on the front line of climate change impacts and bear a significant share of the burden of adopting sustainable practices. While the necessary changes are warranted for society, the benefits of addressing hidden costs are realized all along the supply chain, but producers are not always compensated for the expenses they incur in addressing these costs. In other words, mechanisms need to be put in place to ease the financial and administrative burdens, thereby incentivizing transformational change. Furthermore, acknowledging the diversity within the agriculture sector is crucial for the development of effective policies.
When individual producers join forces by way of collective action, they create a bargaining power they can leverage to advance their goals for economic growth, as well as transformational change. Recent protests by farmers globally underscore the importance of integrating political economy considerations from the outset, by initiating processes that are inclusive and address issues of distributive justice and participation. European farmers have protested against policies, the increase in red tape and the tightening of environmental laws. Transformational change, therefore, needs to be designed so that the costs of taking action today are paid by those reaping the long-term benefits. Government pressure for agrifood systems reform, be it in the form of regulation or incentives, must be carried out in an inclusive manner.
One option is participation in certification programmes, known as voluntary sustainability standards, such as fair trade or organic certifications, which can be a means for producers to receive compensation for the costs of transition. However, although the effect of such certifications on producers’ welfare is generally positive, it varies substantially by standard, crop and farmer organization. Standards that apply a system of quality-based price differentiation have the greatest impact on net farm revenue through a price effect. Certification schemes that enable producers to sell their products with a price premium facilitate the internalization of some, but not all, hidden costs, depending on the specific objectives of the programme. A study on banana supply chains finds external costs 45 percent lower for fair trade producers, making the social case for such quality standards and certifications.
Agribusinesses and investors have an important role to play
Businesses in agrifood systems engage in various activities beyond primary production, including aggregating, transporting, processing and selling food products to consumers. These businesses range from micro- and small enterprises to global corporations, with varying levels of concentration across agrifood systems types. Each subsequent agribusiness in the chain can exert business leverage over the preceding one, depending on its scale and market domination.
The investment community – including international financial institutions, banks and insurance companies – is facing increasing pressure from investors and stakeholders to incorporate environmental and social responsibility into its operations. It is becoming increasingly clear that any investment in agrifood systems must become future-proofed in the face of a changing climate. The notion that “business as usual is a high-risk proposition” is resonating. This is reflected in the increasing participation of large firms conducting environmental, social and governance (ESG) reporting. Interestingly, ESG practices promoted by agrifood businesses are often implemented at the primary production level, but the benefits of the changes are enjoyed by other actors in the supply chain, highlighting once again distributional issues along value chains.
Agribusinesses and financial institutions with more leverage have roles to play beyond exerting their influence over other actors, by investing in better practices, be it through finance, contract arrangements, technical assistance or overall skills and awareness building. Meanwhile, forums such as the World Banana Forum foster collaboration across the different levels of food supply chains and can be a key means of ensuring a just transition.
Consumers are the last – vital – piece of the puzzle
Consumers are the largest group of agrifood actors globally, even though they may lack political clout and visibility. When in a position of agency, consumers can drive the transformative change needed in agrifood systems through their purchasing power.
From an environmental perspective, dietary shifts, especially reducing overall animal product consumption in countries where it is excessively high, can significantly lower GHG emissions and mitigate other environmental harms, such as biodiversity loss, land-use change and nutrient runoff. However, given the large discrepancies in dietary quality around the world, in some places, higher consumption of animal products may be necessary for a balanced diet, and the burden of countering the environmental damage wrought since the Industrial Revolution cannot be equally distributed.
In many countries, populations are facing a double burden of malnutrition, where undernutrition coexists with overweight, obesity or diet-related NCDs, probably requiring a combination of shifting consumer demand, economic measures and social safety nets. The prevalence of the double burden of malnutrition is especially high in countries with protracted crisis and traditional agrifood systems (70 percent) and it decreases as one moves towards industrial agrifood systems (27 percent). The opposite is seen with adult obesity and overweight (from 30 percent in protracted crisis and traditional agrifood systems to around 60 percent in industrial agrifood systems).
Special consideration needs to be given to the nutritional status of children. Children that suffer from undernutrition, particularly before the age of five, face profound and lasting impacts on their physical and cognitive development. Worldwide, in 2022, an estimated 148.1 million children under five years of age (22.3 percent) were stunted, 45 million (6.8 percent) were wasted and 37 million (5.6 percent) were overweight. A methodology applied by the World Food Programme, known as “The Cost of Hunger”, estimates the social and economic impacts of child undernutrition, focusing on the health, education and labour sectors. The results highlight the cross-sectoral need for early childhood nutrition interventions.
The strength of consumers’ purchasing power in driving agrifood systems transformation depends on both their ability and their willingness to pay for a different basket of food products, which may come at a higher price. However, economic constraints do not explain all consumption behaviour. Food preferences, stemming from taste and required preparation time and skills, for instance, as well as food access and environments, are also pertinent. In general, however, individual consumers, as well as institutions with significant food procurement needs, such as schools and hospitals, can capitalize on their purchasing power to simultaneously achieve transformation goals and raise awareness.
Other levers for influencing consumer demand
Economic levers can affect household consumption patterns by varying either relative prices or the incomes available for food purchases. Price measures include taxes and subsidies on food products. For example, taxes on sugar-sweetened beverages, implemented in over 100 countries, have been effective in reducing sales and associated health costs linked to obesity and chronic diseases. Conversely, subsidizing fruits and vegetables has shown positive results where demand is price sensitive. Reforming existing tax regimes, such as differentiating value added tax rates based on health and environmental considerations, could address environmental and health costs without reducing government revenue. Combining these financial measures with improved information, labelling measures, regulations and educational programmes on nutrition, health and sustainability is essential to change diets.
The effectiveness of taxes and subsidies in improving diets hinges on the assumption that consumers do not face budgetary constraints to cover basic nutrient needs. Where undernourishment remains a problem, measures that target income can be effective. These measures include nutrition-sensitive social safety nets that try to enhance food security, promote social inclusion and boost diet quality, either through cash transfers or vouchers that supplement income or with in-kind food assistance. Institutional procurement, such as school and hospital meals, can also have a ripple effect, prompting long-term change. School meals, the most widespread food safety net, can be particularly instrumental in changing consumption patterns over generations when accompanied by effective food and nutrition education. Entities involved in food procurement can have a profound impact by requiring TCA data for the products they buy and shifting their decision-making to maximize true value.
Stakeholder engagement for a true systems approach to transformation
This report has highlighted the need to document the connections between the beneficiaries of today’s actions (carried out by producers, agribusinesses and consumers) and the bearers of the hidden costs of these actions, be they local or global actors of today, tomorrow or generations to come. Involving all interdependent actors within agrifood systems is needed to identify effective levers towards the most suitable development paths.
For instance, under increasing consumer pressure for sustainability and amid government regulations on health and environment, agrifood businesses have been self-regulating for a long time. Voluntary sustainability standards, ESG reporting and multicriteria accounting are all steps in the right direction. However, these are not sufficient for transformation to occur at scale, especially as agribusinesses may meet only the standards required to maintain brand value and fall short of necessary transformative action. As such, these principles need to be combined with well-designed incentive structures, government regulation and action, as well as guidance from international organizations and the TCA community.
Despite the overwhelming importance of sustainable and healthy diets in agrifood systems transformation, health ministries remain largely absent from the current discourse on stakeholder engagement needed to achieve it. Their involvement is an important next step for global agrifood systems transformation, as even in places where health hidden costs are still relatively low, having health ministries at the table can ensure that food value chains and social safety nets can be designed to nip the problem in the bud or avoid the historical peak in unhealthy diets seen during agrifood systems transitions.
Shaping government policy to meet multiple objectives
Governments make many decisions based on imperfect information to meet their national commitments under current agrifood systems structures. This report analyses quantified hidden costs through the lens of an agrifood systems typology, which can facilitate policy recommendations better suited to specific contexts.
In industrial agrifood systems – where primary production is input intensive, value chains are long, urbanization is high and unhealthy dietary patterns create the highest hidden costs – interventions to address unhealthy dietary patterns can be prioritized, thus also addressing a substantial share of environmental hidden costs. Upgrading food-based dietary guidelines to an agrifood systems approach, mandatory nutrient labels and certifications, and information campaigns on health and environmental impacts (including advertisements, regulations on transparency and reporting standards) are all effective levers. However, as policies aiming to change consumption behaviour may take a long time to reduce health hidden costs effectively (even in part), this lever cannot be implemented at the expense of actions to address environmental hidden costs. True cost accounting can help parse value created by various interventions.
In traditional agrifood systems – where primary production is inefficient, value chains are shorter, urbanization is low, and poverty and undernourishment create the highest hidden costs – social safety nets will remain integral policy levers to ensure the food security and nutrition of the most vulnerable. At the same time, the double burden of malnutrition is also highest in these agrifood systems, suggesting a need to complement conventional productivity-enhancing interventions with environmental and dietary levers from the outset to avoid the increase in environmental footprint and peak health costs historically observed during agrifood systems transitions.
Transitional agrifood systems (expanding, diversifying and formalizing categories), where urbanization is increasing and food value chains are lengthening as health hidden costs peak, need to invest in redesigning food value chain development to divert the course of nutrition transitions, leapfrog certain historical transitions and avoid the mistakes of industrial agrifood systems.
There is a growing amount of encouraging evidence on the effectiveness of policy mixes that combine traditional economic and behavioural incentives, though more research is needed to expand this evidence to cover traditional and transitional agrifood systems.
Financing the transformation
It is now well established that financial flows to agrifood systems need to increase significantly to finance the necessary transformation. Many promising initiatives by the finance sector are increasingly incorporating environmental and social responsibility into their operations. Scaling these up sufficiently to achieve global agrifood systems transformation, however, seems bound by “hidden constraints”. These include the distributional issues that arise between different agrifood systems actors and the institutional status quo that makes financing the needed transformations very challenging.
The global cost of transformation is estimated to be within the means of global financial resources; however, as its distribution between countries is highly uneven, financing may be necessary. Especially countries affected by multiple drivers of food insecurity and malnutrition, climate extremes and conflict have limited access to financing, which calls for innovative and collaborative financing partnerships to ensure a just transition.
THE WAY FORWARD
Addressing the hidden costs revealed in The State of Food and Agriculture 2023 and refined in this report inherently requires the distributional issues entrenched in global and local agrifood systems to be addressed as well. Globally, distributional imbalances occur between populations that enjoy the benefits of the status quo and those that bear the hidden costs – which may be those same populations at some point in the future or future generations separated by space and time. Even within national boundaries, trade-offs between different constituencies arise, as evidenced by the recent farmer protests in many parts of the world.
One of basic prerequisites to transforming any large system that comprises interconnections between actors with overlapping and conflicting interests is the existence of an effective institutional and regulatory environment. Creating clear rules and standards and instilling trust that they will be applied fairly to all stakeholders, regardless of size or political influence, takes some of the uncertainty out of investments that contribute to sustainability and fuel innovation.
It is also clear that bringing about the dietary shifts necessary to drive agrifood systems transformation will require a mix of levers. These can use economic influences, such as taxes, subsidies and social safety nets, or aim to affect behavioural change by increasing food literacy and raising awareness about the multidimensional impacts of available food choices. Institutions can also play a critical role by facilitating a unique food environment, such as schools that provide meals and involve children in hands-on and skills-building activities to do with food, while also channelling their purchases to the broader benefit of society.
While the global community can always hope for innovation to solve many of the problems of agrifood systems, this alone is unlikely to steer agrifood systems towards sustainability. Governance across agrifood systems needs to be transformed through political will and strong accountability at the international level.
