True Cost Accounting for Food: Balancing the Scale

A recent report released by the Rockefeller Foundation finds that when accounting for the health and climate impacts of the US food system, Americans pay only a third of the actual cost of food. For a comprehensive look at the challenges and complexities of calculating the true cost of food, VX News presents an excerpt from Routledge Studies in Food, Society and the Environment’s recently published, "True Cost Accounting for Food: Balancing the Scale." In this excerpt, food equity experts Barbara Gemmill-Herre, Lauren E. Baker, and Paula Daniels outline a holistic framework for true cost accounting and advocate for systemic shift in food policy and practice to foster healthy, sustainable and human-centered food systems. Read the open-access edition of the book online, here.

Introduction: The Urgency of Now

Calls are coming from all quarters that the food system is broken and needs a radical transformation. A system that feeds many yet continues to create both extreme hunger and diet-related diseases, and one that has significant environmental impacts, is not serving the world adequately. This volume argues that True Cost Accounting in our food system can create a framework for a systemic shift. What sounds on the surface like a practice relegated to accountants is ultimately a call for a new lens on the valuation of food and a new relationship with the food that we eat, starting with the reform of a system out of balance. From the true cost of corn, and water, to incentives for soil health, the chapters economically compare conventional and regenerative, more equitable farming practices in food system structures, including taking an unflinching look at the true cost of cheap labour. Overall, this volume points towards the potential for our food system to be more human-centred than profit-centered and one that has a more respectful relationship to the planet. It sets forth a path forward based on True Cost Accounting for food. This path seeks to fix our current food metrics, in policy and in practice, by applying a holistic lens that evaluates the actual costs and benefits of different food systems, and the impacts and dependencies between natural systems, human systems, and agriculture and food systems

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Why TCA, Why Now?

 Behind all the food that we eat is a vast realm of unaccounted for interactions: the diversion of water from rivers; the extraction of nutrients from soil; the discharge of pollutants to air and water; the exaction of labor to grow, manage, pick, and package; the release of carbon dioxide to transport and deliver; and so on. When we shine a light on these interactions it becomes clear that a 99¢ hamburger costs all of us a lot more than the dollar placed by a consumer into the hands of a cashier. The singular focus of the business model that made cheap food possible overlooks the multiple costs to society related to suffering with or cleaning up pollution, the cost of social assistance or food charity for large segments of the population who are not paid enough to buy the food they grow, manage, pick, or package, and the public health costs from the diet-related disorders that are a direct consequence of industrially created highly processed food, to name just a few. In the end, this “cheap” hamburger is extremely expensive, but most of the cumulative cost is borne by all of us as a global community. A central challenge is that the uninformed choices that we as consumers, as policymakers, and businesses make perpetuate the problem.

TCA (sometimes referred to as “full” cost accounting; here, we use “true”) provides a framework for systemic shifts across food systems. It allows for aggregation of information across affected economies and aspects of the food supply chain (production, processing, distribution, and retail). It intends to create transparency for regulatory decision-making that can realign subsidies in a more balanced direction. It facilitates broad engagement from farmers to consumers, bridging practice and policy. What sounds, on the surface, like a complicated tool relegated to accountants is ultimately a clarion call for a new economics of food and a new relationship with the land and the food that we eat, starting with a holistic view of a system out of balance and ending with a new approach to business and integrated reporting. As TCA enters our vocabulary, readers might find it helpful to turn to the glossary as developed by the Global Alliance for the Future of Food (Eigenraam et al., 2020).

Holistic Framing

True Cost Accounting: Balancing the Scale includes a review of the theoretical and ontological roots and tensions within prior systems of accounting for the “externalities” of agriculture and food systems: those impacts that are a direct result of system activities, but whose consequences and corrections are not borne by the original parties. The more recent evolution of TCA, extended beyond environmental economics and accounting to include social, human, and health aspects, is traced. What emerges strongly throughout many chapters of this book is the need for integrated systems-based framing, taking a holistic view of all interactions comprising a food system.

 Measurement and Metrics

As we struggle to find ways to manage our food system for public and planetary health, we need different ways of measuring, which in turn lead to more inclusive and holistic metrics. Currently, our ability to trace economic flows that create negative or positive consequences across the food system is hampered by opacity, as inscrutable as a compressed line on a corporate ledger. It remains more profitable to damage the environment and negatively impact human health, than to protect either of these. Yet the resultant costs are not evident to citizens or consumers, who pay at least twice or three times: at the checkout; for their poor health; and in loss of biodiversity (as one example). The organic food sector has long sought to translate principles and standards into the labeling of food, giving price incentives for food produced in ways that add value to the public good (“Incentives to Change: The Experience of the Organic Sector”).

Measuring costs—and benefits—is far from an exact science, with inherent uncertainties and approximations (“Incentives to Change: The Experience of the Organic Sector”). Developing values for what has not previously been measured involves the engagement of communities throughout food systems and across value chains, as clearly illustrated in Chapter 3 by the process of bringing people together to account for water use and costs in the Andes (“Upstream, Downstream: Accounting for the Environmental and Social Value of Water in the Andes”). It demands that we respect the diverse ways of assigning value, which have often been characterized through monetary units, but do not need to be. TCA is subject to the critique that it is another extension of neoliberal policies that unduly quantify nature, thus constraining a more comprehensive respect for its life-giving pricelessness. Monetary units reflect a current societal norm, but this book’s authors argue that this is often a poor choice that can and should be reconsidered (“The Economics of Ecosystems and Biodiversity”). More holistic and inclusive measurements of value can consistently help to identify which pathway we are on when considering all food system impacts, whether in a positive or negative direction. In the search for universal application and local contextualization, a number of authors in this volume stress that the value of this realigned framework of measurement and metrics is to arrive at estimates that point us in the right direction, rather than (perhaps impossibly) striving for the exact or perfect information in finite degree  )New Metrics for the 21st Century,” “Harmonizing the Measurement of On-Farm Impacts”).

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 De-Risking the Future

Risk is another theme underscored by authors in this volume—a compelling motivation for the engagement of the private sector. For many companies, it is the risk of supply chain disruptions owing to dependencies on natural, social, and human capital that brings them to focus on how they can build, rather than draw down these capitals (“From Practice to Policy: New Metrics for the 21st Century”). It is a challenge to introduce wholesale systems change through TCA to companies and institutional investors who logically seek enterprise or fund-level success. Addressing risk and risk exposure could have positive impacts at the enterprise/investment level and for food systems more broadly if the right metrics are considered (“Investing in the True Value of Sustainable Food Systems”). As noted in Chapter 14, “The Business of TCA: Assessing Risks and Dependencies Along the Supply Chain,” although the importance of the state of nature, ecosystems, and employees for the success of companies is undeniable to the corporate sector, these impact drivers have not been sufficiently considered in quantitative risk management. Redefining risk, reward, efficiency, and the issue of scale to align with the systems approach of TCA is both a challenge and a potential game-changer (“Investing in the True Value of Sustainable Food Systems”).

 Chapter 14 (“The Business of TCA: Assessing Risks and Dependencies Along the Supply Chain”) reminds us of the importance of looking beyond conventional food and agriculture stakeholders, as important as they are (farmers, food processors, markets, etc.) to those in the banking, finance, and insurance industries that can also drive change. If at present it is the general public—communities and taxpayers—who are paying for the negative externalities in our food system, the transformations required for our food systems to meet the synergistic needs of humans and nature will require those in investment and finance to understand and address such costs. The chapters on investment and supply chains note that a TCA assessment for those in the private sector must demonstrate benefits of better practices not only using sustainability language but in tangible financial terms and incorporate these in credit ratings, insurance policies, annual accounts, and company valuations (“The Business of TCA: Assessing Risks and Dependencies Along Introduction 7 the Supply Chain” and “Investing in the True Value of Sustainable Food Systems”). In Chapter 15, a strong need is articulated for a common approach and metrics to measure impact and to have those metrics align with accounting standards (“Investing in the True Value of Sustainable Food Systems).

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The Externalities of Farming, Positive and Negative

TCA does not end with farmers, but it begins with them. As described in the “Harmonizing the Measurement of On-Farm Impacts,” farms are the basis of all food systems, containing the key to their vitality. While industrial agriculture might be responsible for excessive use of toxic chemicals, pollution of waterways, and sterile soils, ecologically based farming systems are capable of minimizing or eliminating such inputs, restoring soil fertility, fostering diversity, and creating building resilience against the shocks anticipated with climate change, while producing nutritious food and providing a decent quality of life for farmers and farm workers. But none of this can be done in isolation; working with farmers to recognize these positive externalities is central to TCA in agriculture and food.

True Cost Accounting as a Transparent Process

Negative externalities are not new; they are a form of market failure that has existed as long as markets have existed. But current global economic structures, with vastly increased technological growth, international trade and the institutionalization of the price-based market model has led to a massive externalization of costs in food and agriculture, through the drive for higher shared public costs and lower food prices throughout the world (“True Price Store: Guiding Consumers”). The author of Chapter 18 (“True Price Store: Guiding Consumers”) proposes that if true costs are the problem, true prices (the market price, together with added external costs) and transparency regarding both of these are the solution. Establishing what is “true” and how to measure it naturally has challenges but provides important opportunities to link to consumers, to highlight environmental impacts and human rights (“True Price Store: Educating Consumers”). It also provides scope for dialogue across value chains and for companies to communicate differently about their impacts, positive and negative. Chapter 9, “Fostering Healthy Soils in California: Farmer Motivations and Barriers,” on building incentives for sound agricultural practices points to the disconnect between consumers and the producers and processors that, without ways to communicate more transparently, hamper the ability of consumers to make choices that internalize true costs. We are invited to see “true pricing” is as an activity rather than an analysis, as a decisionmaking process in which everyone can participate as a consumer, citizen, business owner, employee, investor, and policymaker (“True Price Store: Guiding Consumers”).

Conclusion

 

As a whole, the chapters in this book point toward the potential for our food system to be more human centered than profit centered; and toward a food system that has a more respectful relationship with the planet. The authors outline a path forward based on TCA for food. This path seeks to broaden, expand, and fix our current food metrics, in policy and in practice, by applying a holistic lens that evaluates the actual costs and benefits of different food systems, as well as the impacts and dependencies between natural systems, human systems, and agriculture and food systems. Most importantly, this path acts upon this integrated understanding to create an economic system that respects true costs and results in a more balanced relationship with respect to its role in the world.

Find the open-access edition of the book online, here.

“What sounds, on the surface, like a complicated tool relegated to accountants is ultimately a clarion call for a new economics of food and a new relationship with the land and the food that we eat, starting with a holistic view of a system out of balance and ending with a new approach to business and integrated reporting.”

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