TRUE COST ACCOUNTING

Revealing Externalities

Valuing the impacts and dependencies that food systems have on the economy, environment, and society.

Food that supports the health of both people and the planet should be affordable and readily available. However, the impacts of industrial food systems often come with costs that are not paid for at the source.

Instead these costs are paid for by individuals, governments, and the environment through diet-related diseases, polluted land and water, poverty and exploitation, supply chain risks, and more. Meanwhile, approaches that create benefits for society are undervalued and overlooked.

By making more informed decisions about food production and consumption, we have the power to positively transform the environment, health, and prosperity of communities and nations.

But how do we make more informed decisions?

By expanding our thinking beyond narrow measures of food system success, like crop yield, to consider the system’s true costs and benefits. True Cost Accounting does just that.

True Cost Accounting (TCA) is an evolving holistic and systemic approach to measure and value the positive and negative environmental, social, health and economic costs and benefits to facilitate business, consumer, investor and/or policy decisions.

Our Vision and Principles

Over the course of the TCA Dialogue Series and Summit, stakeholders consistently pointed to the need for a definitive articulation of core TCA principles to provide clarity and comparability between TCA initiatives and ensure their success in driving real, systemic change. In response, the TCA Accelerator commissioned a review of existing literature and — following extensive stakeholder consultation — developed this resource to guide TCA practitioners and more clearly define and differentiate this approach going forward.

TCA fosters transparent, systemic analyses of agrifood systems to guide decisions that uphold human rights and the well-being of people, animals, and the planet.

1. Comprehensive and Systemic

TCA must look holistically at how food systems impact and are dependent on people, communities, nature, and economies. A TCA analysis must consider both the positive and negative impacts across four “capital” areas — human, social, natural, produced — and account for the relationships between them to provide the full picture of the true value of food and farming.

2. Inclusive and Collaborative

TCA ensures that everyone affected has a voice. It must be a collaborative process involving actors at all four evaluation stages: Framing, Describing and Scoping, Measuring and Valuing, and Taking Action.

3. Based on Robust Information and Data

Data sources and assessment methods may vary between TCA analyses, but stakeholders should rely on the most robust and appropriate approaches suitable and available to their context, acknowledging any limitations. TCA evaluations should seek to build upon relevant bodies of work and reference emerging consensus on best practices and common language.

4. Transparent

To foster trust and prevent misleading claims, the process, decisions, methods, and results of TCA evaluations must be thoroughly documented and disclosed.

5. Relevant to Real-World Decision-Making

A TCA evaluation should start with an actionable question or problem to solve. It should compare multiple options and show the trade-offs of each, so decision-makers can choose solutions that maximize positive outcomes for people and the planet.

TRUE COST ACCOUNTING: AN ECONOMIC MODEL FOR FOOD SYSTEMS TRANSFORMATION

The four capitals model for evaluating food system impacts and dependencies was established in 2018 by the United Nations Environment Programme’s Economics of Ecosystems and Biodiversity for Agriculture and Food initiative (TEEBAgriFood). 150 contributors from 30 countries contributed to the TEEBAgriFood Evaluation Framework, setting the foundation for most True Cost Accounting assessments in use today.

NATURAL CAPITAL

The limited stocks of physical and biological resources found on Earth, and the limited capacity of ecosystems to provide benefits to humans and other living creatures.

HUMAN CAPITAL

The knowledge, skills, competencies, and attributes embodied in individuals that facilitate the creation of personal, social, and economic well-being.

SOCIAL CAPITAL

Networks, including institutions, that share norms, values, and understandings that facilitate cooperation within or among groups.

PRODUCED CAPITAL

All manufactured capital, such as buildings, factories, machinery, and physical infrastructure, as well as all financial capital and intellectual capital.

Source: Capitals Coalition, Global Alliance for the Future of Food, and UN Environment Programme (2021)

Common visible and invisible links in eco-agri-food value chains

Source: The Economics of Ecosystems and Biodiversity (TEEB) (2018). TEEB for Agriculture & Food: Scientific and Economic Foundations. Geneva: UN Environment.

Advancing TCA Into Common Practice

Business and government leaders around the world are employing True Cost Accounting as a tool to provide more accurate assessments of social, economic and environmental conditions. These assessments can inform policy and business decisions that make healthy, sustainably grown food the norm for all.

 

JOIN THE MOVEMENT AND SUPPORT FOOD SYSTEMS TRANSFORMATION!