True Cost Accounting to Assist Good Governance: Opportunities and Challenges
Nadia El Hage Scialabba reflects on vested interests, such as agribusiness influence on research, and how they distort food system governance and priorities.
by Nadia El Hage Scialabba | 2024-11-20
Governance is the process of making and implementing decisions (UN-ESCAP, 2009), be it in the environmental, economic, or social sphere. Decisions are made by institutions, formal and informal. Thus, the institutional dimension is key to successfully implement, in the long run, all aspects of sustainability. Good governance explicitly considers all affected stakeholders and shareholders of any activity within value chains and relations among all parties. A good governance framework states values and responsibilities through transparency and accountability. It also organizes processes that facilitate active participation of all stakeholders, while being oriented towards legitimacy, the rule of law, and holistic management (see SAFA Guidelines, 2014).
True Cost Accounting (TCA) is embedded in the intent of all those striving for triple bottom line considerations, environmental, social, and economic. In fact, TCA pillars include environmental, social, human, and produced capital impacts and dependencies. However, the ‘social capital’ elements considered are often limited to labour conditions (e.g. wages, freedom of association, safety), equity (e.g. gender, indigenous peoples, rights over resources), capacity development of producers and consumers, and social networks. Values underpinning how institutions make and implement decisions, which range from maximizing profits to fostering common goods, are rarely included in TCA analyses. This is due to the qualitative aspect of governance issues. By often aiming to quantify and monetize everything, TCA works against its unique purpose of bringing together all aspects of sustainability.
However, governance indicators found in instruments such as the United Nation’s Principles for Responsible Investment (2006), the United Nation’s Global Compact and the Global Reporting Initiative (GRI) Standards (2013) aim to disclose enterprises’ performance, but without digging deep enough into the internal governance mechanisms (e.g. accountability, transparency, power unbalance) that underpin their operations, due to obvious economic motivations. Through the last few decades, this has led to an ever-increasing amount of sustainability codes and sustainability reports, while sustainability on the ground is sadly ever more out of sight.
The hidden costs of poor governance in the industrial food chain are largely due to research and regulation directions influenced by vested interests. For instance, agribusiness and private foundations are assumed to influence the CGIAR research priorities, as 45 percent of the overall research budget is biased towards private sector market priorities for crop and livestock, while undervaluing agroforestry and less commercial species. A 15-year-old calculation within the CGIAR showed that approximately 40 percent of the budget was devoted to fundraising and administration partially necessitated by public-sector failures. IPES–Food’s “Long Food Movement” (IPES-Food & ETC Group, 2021) report offers speculative data on the governance costs of the willing-based agencies estimating duplications of services and mission creep. National public sector research and development budgets are increasingly biased toward agribusiness priorities and sometimes even require private sector endorsement, transforming public scientists into “cheap labour” performing tasks outsourced by the private sector to cut costs. Also, high food safety and environmental regulations, both national and international, are sometimes encouraged by agribusiness in order to discourage corporate or state competition.
By translating Corporate Social Responsibility (CSR)-like assessments into quantified performance, TCA presents expanded opportunities but also challenges. While TCA undoubtedly brings transparency on assessed outcomes, it does not necessarily shed light, for instance, on risk-based due diligence of actual and potential adverse impacts related to science, technology and innovation, including the development, financing, sale, licensing, trade, and use of technology, including the collection and use of data, as well as scientific research and innovation. The same applies to responsible data governance, combatting bribery and other forms of corruption and competition, all of which are embedded in OECD Guidelines for Multinational Enterprises (2023). Besides being a dramatic eye opener to decision-makers, TCA would better succeed in its purpose by moving away from monetization and adopting a rated scale of valuations that can integrate qualitative and quantitative indicators (see From Practice to Policy, New Metrics for the 21st Century, 2021). For instance, the Planetary-Pressures Adjusted Human Development Index ( successfully aggregates environmental and socio-economic variable to produce a footprint index. At the end of the day, it is the trend that better informs incremental food system change.
Nowadays, the true cost of governance is a burning question requiring structural changes to better manage food systems among local stakeholders/shareholders actions, national policies and within the multilateral system. TCA holds promise in accompanying food system transformation on a good path by unveiling the full costs of action or inaction, as well as by asking inconvenient questions, or identifying knowledge gaps. TCA depicts a sort of ‘impressionist landscape’ where some elements are more blurred than others – but it is a full coherent landscape!
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