TMG Think Tank for Sustainability

True Cost Initiative launches standardised guidelines for the agrifood sector

Practical guidelines for the food and farming sector on impact measurement, valuation and reporting

by Louisa Nelle

Mar 11, 2022

True Cost Initiative launches standardised guidelines for the agrifood sector

Last week saw the successful launch of the TCA AgriFood Handbook, which concludes the three-year True Cost Initiative project. The launch took place during the National Dialogue organised by the German Federal Agency for Agriculture and Food (BLE) following the UN Food Systems Summit (UNFSS).

TCA practitioners during the Handbook launch

The immediate feedback we have received as so far has throughout been very positive. The TCA AgriFood Handbook explains how to calculate the true costs and develop strategies on how to set the course for the transformation to sustainable food systems. What is needed now is social awareness of hidden costs, acceptance for new accounting systems and political will to implement TCA in a binding way.

Panelists explaining how TCA can help food companies measure their impact on natural, social & human capital

Why True Cost Accounting?

The regulatory, financial, and societal pressure on companies to transition to more inclusive and environmentally sustainable practices has never been greater. To do this, businesses must gain comprehensive insights into their own supply chains to develop more resilient business models that while continuing to fulfil customer and legal requirements.

These multifaceted demands call for more comprehensive risk assessments, as well as more transparent reporting. This in turn requires high quality and comparable data to guide decision making as well as monitoring of compliance.

True Cost Accounting (TCA) can support unified approaches for data collection, indicator development and reporting. It provides businesses with a systematic framework to assess, value and report their environmental, social, and human impacts.

One of the greatest obstacle to the widespread adoption of TCA is the lack of standardised approaches that can ensure fairness and transparency in accounting for direct and indirect costs. Developed by the True Cost Accounting Initiative, this Handbook aims to address exactly this problem. The TCA Handbook provides practical guidance for agrifood businesses on how to systematically measure, value, and report on external costs within their supply chains. Building on The Economics of Ecosystems and Biodiversity for Agriculture and Food (TEEBAgriFood) framework, the methodology centres around three capitals – natural, social and human capital.

What is the added value of the True Cost Accounting AgriFood Handbook?

The Handbook provides a TCA guide for plant-based products that has been practically tested and evaluated by businesses in 14 countries, spanning five continents. Covering 20 agrifood supply chains, the Handbook provides companies with detailed guidance on how to calculate and monetise all the costs of the food and agricultural products they produce..

Besides existing financial indicators, the TCA Handbook provides users with concrete indicators and data collection methods to measure environmental, social, and human impacts along the value chain of food and agricultural products.

The Handbook describes how sustainability information in the form of true cost accounting can find its way into companies' annual financial reporting. This is a game changer for ensuring that sustainability information gains a foothold in the financial sector.

Who can use the TCA AgriFood Handbook? 

The Handbook is targeted at food producers, distributors, and other agrifood value chain actors. It is also relevant for national and regional agrifood policy and legislative frameworks, and the corresponding oversight institutions. These include the German Supply Chain Act, the EU Corporate Sustainability Reporting Directive, and the EU Common Agricultural Policy. By promoting standardised accounting approaches, such insitutions can contribute to a level playing field for all value chain actors and hence incentivise the broad adoption of more sustainable food production and consumption practices.

The Handbook also contains messages for the scientific and business reporting communities to contribute to the further development and standardisation of TCA methodologies.

Finally, the Handbook is a reminder to every single one of us that our food consumption choices matter. Consumers have an important role to play by demanding agrifood companies to become more transparent in how they report about their social and environmental impacts, and hence recognise the true cost of food.

In case you missed the event you can access the recording here.

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