The release of the preliminary results of TCA assessments for 154 countries in The State of Food and Agriculture 2023 garnered the interest of many governments. The 2024 edition of the report refines those preliminary estimates, confirming the high degree of certainty that they exceed 10 trillion dollars, and provides a more detailed assessment of policy entry points for governments everywhere. Although TCA is increasingly being used on a smaller scale to bring stakeholders together in certain value chains, its applications at national level remain limited.
Governments everywhere use various policy tools (such as cost–benefit analysis, life cycle assessment or similar) to assess the effectiveness of different interventions to guide decision-making. True cost accounting can support administrative processes for developing policy incentives (positive and negative) that orient all stakeholders (smallholder farmers, consumers, private multinationals and ministries) within a systems approach. In particular, it can ensure that, as much as possible, distortions and distributional issues can be resolved once externalities are evaluated and the true cost of various actions is transparent to policymakers (Box 30).7
Box 30Guidance for national governments on true cost accounting
The cost and complexity of agrifood systems interdependencies that true cost accounting (TCA) aims to document may put off national governments. However, the principles of TCA are not a huge departure from cost–benefit analysis (CBA), a tool used by many governments to make decisions. While there are differences in scope (for example, CBA rarely considers all four capitals), CBA and TCA share similar methodologies and goals, both aiming to measure societal value. This relationship extends to other frameworks that estimate non-market social values, such as life cycle assessments (LCAs), environmental, social and governance impact indices, and Sustainable Development Goal reporting. Life cycle assessments originally came up against similar reluctance among rule-makers due to their perceived complexity, but their use has become more widespread over time as more LCAs, as well as tools and harmonized databases, have become available. Integrating TCA into policy and decision-making processes offers a unified and simplified approach, enhancing the coherence of these efforts.
The State of Food and Agriculture 2023 outlines a policy process that integrates TCA for setting policy priorities and CBA for selecting the best alternatives for transforming agrifood systems. This approach employs systems thinking to evaluate trade-offs and synergies, addressing potential inconsistencies caused by the segmentation of public policy into various departments with conflicting goals. It also emphasizes stakeholder engagement, which enhances policy transparency and refinement by balancing interests and garnering support from various stakeholders.
Such a political framework can be readily implemented by governments that already incorporate CBA and stakeholder engagement into their policymaking processes. Policymakers focused on transformation will recognize the benefits of adopting a TCA-driven approach, which consolidates previous efforts and enhances the coherence of existing initiatives. The potential for improved policy outcomes and the significant value of transforming agrifood systems will encourage them to pragmatically overcome challenges such as data scarcity and to refine their decision-making processes iteratively, in line with TCA principles.
The one national-level TCA assessment in this report that was part of a policy process was conducted in Switzerland. It underscored both challenges and opportunities. The experience was facilitated significantly by the fact that it was part of an ongoing multistakeholder process to create a vision for national agrifood systems. In addition to validating The State of Food and Agriculture 2023 national numbers as a good starting point for targeted assessments, the study expanded on them with new components using nationally relevant data sources. One of the key practical lessons is that while data quality is important, a pragmatic approach to TCA can facilitate fruitful stakeholder engagement and help identify where past decisions have failed to fully account for their hidden costs. This study also underlines the role of targeted TCA assessments in course correction by concluding that “prioritization” does not necessarily mean taking action on the largest hidden cost components, but includes investing in pre-emptive actions to prevent today’s negligible hidden costs from becoming too big to deal with in the future – for example, antimicrobial resistance in Switzerland.
Alternatively, by exposing the difficulties of addressing large hidden costs, decision-makers may decide to prioritize hidden costs that are more easily addressed by policy in light of existing institutional structures. Within this context, the study underscores the importance of scrutinizing existing agricultural policies, including regulations and subsidies, to reset incentive structures.12 Similar pragmatic approaches are highlighted in this edition of The State of Food and Agriculture as potentially “low-hanging fruit" – for example, the reform of existing agricultural support or VAT on agrifood products without the need for additional government funding. Such pragmatic policies, nevertheless, can create social hidden costs if they disproportionately affect certain subpopulations and would need to be complemented with commensurate measures.
Shaping government policy to meet multiple objectives that affect an increasing number of stakeholders over generations is easier said than done – as the last column in Table 3 shows with a long list of potential levers. At the same time, government interventions are central to sustainable agrifood systems transformation, as without them, markets “are blind to sustainability”12 and voluntary action will remain insufficient. Therefore, governments make many decisions based on imperfect information to meet their national commitments under current agrifood systems structures.
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 of 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 health-focused policies aiming to change consumption behaviour may take a long time to act, this lever cannot be implemented at the expense of actions to address environmental hidden costs in the present. 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 – inclusive rural transformation will remain a priority, including social safety nets as integral policy levers to ensure the food security and nutrition of the most vulnerable. At the same time, the double burden of malnutrition is 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 nutritional transitions, “leapfrog” certain historical trends in diets and avoid the mistakes of industrial agrifood systems.13
Regardless of the agrifood systems context, evidence is building on the effectiveness of bundles of interventions, especially in cases where distributional imbalances create trade-offs between different stakeholder groups.14, 15 Although most existing evidence is focused on the energy sector, effective strategies identified by this literature can guide agrifood systems policymaking. For example, farmers would be more likely to support a policy regulating nitrogen use if it were bundled with policies requiring agribusinesses and financial institutions to provide preferential treatment to complying farmers. If a policy package is likely to affect vulnerable populations disproportionately, combining it with compensation measures is likely to increase political support. There is a growing amount of encouraging evidence on the effectiveness of policy mixes that combine traditional economic and behavioural incentives;14 more research is needed to expand this evidence to cover traditional and transitional agrifood systems.
Health ministries remain largely absent from current discourse on the stakeholder engagement needed for agrifood systems transformation. Though some health ministries have played a central role in instituting notable policies targeting unhealthy food consumption patterns in Latin America, such initiatives are mostly not linked to wider agrifood systems policies. The inclusion of health ministries is an important next step on the global agrifood systems transformation agenda, as even in places where health hidden costs are still relatively low, having them at the table can ensure that food value chains and social safety nets are designed to nip the problem in the bud or avoid the historical peak in unhealthy diets seen in agrifood systems transitions.
In South Africa, the roles of different groups (for example, coalitions on economic growth, food security, agricultural production and health) in the process of designing policy bundles for food security and nutrition were examined.16 While the economic growth coalition had the most influence, the health coalition had the least, despite the significant health hidden costs generated by the country’s agrifood systems (about 9 percent of GDP). This is but one example of the glaring absence of health ministries from the global discourse on advancing agrifood systems transformation objectives. Health policy discourse itself rarely takes an agrifood systems approach, underlining the need for efforts to bridge the gap at both ends.17
