The State of Food and Agriculture 2023

Chapter 4 Mainstreaming True Cost Accounting to Support the Transformation of Agrifood Systems


This edition of The State of Food and Agriculture highlights the need for decision-makers – from governments to businesses, investors and consumers – to systematically account for the hidden costs and benefits of agrifood systems in order to guide structural change towards systems that deliver affordable healthy diets to all while respecting environmental limits. The report recognizes true cost accounting (TCA) as a fitting methodology for assessing these impacts. It proposes a two-phase TCA approach to capturing the complexity and interdependence of agrifood systems actors: starting with wider, national-level TCA assessments involving high levels of uncertainty, and followed by targeted evaluations that account for context specificities to better prioritize solutions.

This last chapter discusses the different transformational levers that influence the inner workings of agrifood systems and how these can be strategically employed to propel systems to sustainability. Levers can target the activities of agricultural producers, agrifood businesses and consumers through supply- or demand-side interventions, or support agrifood systems through the provision of general services. No single lever is new, but the innovation lies in how they are used. While governments have the broadest and most influential toolkit, other actors, namely research institutions, civil society organizations, businesses and financial institutions, also play significant roles in shaping the performance of agrifood systems.

Given the role of agrifood systems assessments in informing decisions, TCA needs to become part and parcel of decision-making. This chapter recognizes the complexity of this exercise and suggests that TCA become the norm in analysing agrifood policies, measuring their impacts and reforming them to make the required transformation towards sustainability. This is certainly a complex challenge that requires collaboration between different local, national, regional and international actors, including governments, international organizations, private-sector entities and farmer associations.

The chapter ends with important considerations for choosing policies, including the need to handle multiple policy objectives, and how addressing the hidden costs of agrifood systems need not necessarily raise the price of food. Ultimately, the mainstreaming of agrifood systems assessment is critical to FAO’s vision of transitioning to more efficient, inclusive, resilient and sustainable agrifood systems for better production, better nutrition, a better environment and a better life, leaving no one behind. The aim is to use this report as a starting point to build momentum and inspire all to undertake meaningful actions to scale up TCA to inform the transformation of agrifood systems towards sustainability.

The need for innovative solutions and strategies to transform agrifood systems has also been agreed in global processes such as the United Nations Food Systems Summit (UNFSS) in September 2021 and the United Nations Food Systems Summit + 2 Stocktaking Moment (UNFSS+2) in July 2023. Against this backdrop, FAO is investing in TCA as an approach to support decision-making. In doing so, for the first time ever, the next edition of The State of Food and Agriculture (2024) will be devoted to the same theme: assessing the impacts of agrifood systems – both positive and negative – to uncover the true cost of food and inform decision-making for agrifood systems transformation. The 2024 edition will build on the 2023 edition and aim to catalyse action and transformation by providing concrete examples of how assessments of the impacts of agrifood systems can affect change. In particular, it will provide insights into how TCA can be scaled up across a range of value chains and countries, even in data- and resource-constrained contexts.

By having two consecutive editions dedicated to this topic, FAO is paving the way for agrifood systems assessments to become an essential element in decision-making. It aims to mobilize resources to scale up such assessments and build momentum and engagement among Members and all stakeholders shaping future policymaking. The objective is to provide decision-makers with a systematic approach to evaluating the current state of their agrifood systems, identifying the most feasible and cost-effective solutions, allocating resources for implementing those solutions, assessing their impact over time and making adjustments as needed.

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