TMG Think Tank for Sustainability
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Towards a new economic and governance approach for food systems transformation

TMG provided a pivotal background paper on True Cost Accounting to SOFA, and used this platform to call for stronger, more integrated and accountable business reporting standards.

by Olivia Riemer, Lisa Maria Klaus | 2024-02-26

Towards a new economic and governance approach for food systems transformation

The current economic system generates hidden costs and benefits (externalities) due to environmental, social and health impacts. These unaccounted-for factors, such as greenhouse gas emissions from the global food system and health issues, are not reflected in economic accounting systems. Regeneratively managed soils on the other hand provide positive externalities, contributing to carbon storage and biodiversity. However, corporate balance sheets and GDP do not capture these aspects.

Hidden costs and benefits encourage unsustainable production and consumption

Failure to recognize these externalities leads to market distortions and policy failures that incentivize unsustainable production and consumption. This undermines sustainable development and the economic foundation built on natural, social, and human capital. Without change, existing frameworks will sustain exploitation in global supply chains, ecosystem destruction, and discourage investment in sustainable transformation. Against the overwhelming power of existing economic and political forces, current global sustainability efforts will be insufficient.

TMG therefore supports the development of an alternative accounting system, called True Cost Accounting (TCA), as well as a new understanding of the governance of transformation processes within the realm of food systems. 

Background paper by TMG contributed to new FAO report 

TMG contributed a background paper on True Cost Accounting to this year's FAO report, The State of Food and Agriculture (SOFA) 2023 on the hidden costs of the global food system. With a focus on the private and financial sector, the background paper of TMG identifies the shortcomings of current accounting and reporting standards, showcases early effort of the private sector to apply TCA and outlines the steps needed to mainstream TCA. It is a great step forward to see our recommendations being taken up at international level with FAO recommending UN member states to adopt True Cost Accounting in order to address the issues of unsustainable food systems. For this international momentum to result in a reform of business accounting and reporting standards, we need to develop concrete guidelines for integrating TCA and overcome barriers such as the lack of data and standardization of methods. TMG and other partners have formed the TCA Alliance which will continue working towards that goal in the coming years. 

Improving governance for food systems transformation 

In addition to a better economic accounting system, there is also an urgent need for better governance structures for our food systems. To this end, TMG launched the Foresee (4C) series in 2023. The series consists of four peer-reviewed reports that outline how we can succeed in transforming our food systems. While reports 1 to 3 assess the current conditions, state of the debate and blind spots, the latest report aims to explore the key actors and drivers for transforming agri-food systems. It advocates for a multi-level governance approach, incorporating global agreements (primarily the three Rio Conventions - CBD, UNCCD, UNFCCC), national pathways, and implementation. In an open letter to the Rio Conventions, TMG calls for the Rio Conventions to take center stage in the governance of the food systems transformation process, given the international legitimacy of the Conventions and the close linkages between agri-food systems and the goals of the Conventions. Report 4 has been launched at the UN Climate Change Conference (UNFCCC COP28) in Dubai as part of two side events that were organized by TMG and WWF, presenting the report’s concise decision support tool for developing transformation pathways. 

What’s next? Outlook 2024

TMG will continue its work on the governance of food systems transformation, with a fifth report in 2024 focusing on the links between sustainable production and consumption. 

TMG will further support the implementation of True Cost Accounting at German and EU level by establishing a TCA Alliance and gaining new members and by launching a free TCA database. In doing so, TMG aims to make a practical contribution to the transformation of our economic system in the area of food systems.

On Febraury 15th, TMG presented the SOFA background paper at a session of the TCA Alliance at the BIOFACH congress.

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