The current economic system, and in particular the way we neglect to measure, value and report the impacts of food products and consumption, is fundamentally responsible for today's unsustainable and inequitable food systems. It misaligns incentives, neglects critical components in the distribution of economic value, and renders negative externalities economically invisible.
The Food and Agriculture Organization of the United Nations (FAO) is addressing this issue in its flagship State of Food and Agriculture (SOFA) 2023 report, which was launched today. This year’s edition analyses the substantial, but often hidden costs on our health, environment, and society caused by our current unsustainable agrifood systems. The report proposes true cost accounting to quantify the hidden costs generated by market, institutional and policy failures.
Part of the launch of SOFA 2023 is the background paper “The role of true cost accounting in guiding agrifood businesses and investments towards sustainability” prepared by TMG. The paper describes how TCA and the lessons learned from applying TCA in the private and financial sectors can inform efforts to develop a sound economic basis for sustainability. TCA allows the private sector to manage and account for the hidden costs of business operations and investments and the associated risks. It is a tool to measure and report impacts on nature, people, economy and society in financial terms thereby allowing the integration into economic decision-making.
The findings of the background paper underscore that TCA has evolved from an academic theory to an important tool for private sector companies to account for sustainability information in financial and strategy decision making. The authors commend this progress while calling for a reform of national and international accounting and reporting standards to take into account impacts and dependencies beyond financial capital, including natural, social and human capital.
Their key message: In order to derive sustainable food systems, we need to introduce TCA into the economic system.
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