The role of true cost accounting in guiding agrifood businesses and investments towards sustainability

The current economic system, and in particular the way we fail to measure, value and report on the impact of food products and their consumption, is primarily responsible for today's unsustainable and unequal food systems. It mismatches incentives, neglects critical components in the distribution of economic value, and makes negative externalities economically invisible.
The Food and Agriculture Organization of the United Nations (FAO) addresses this issue in this report The State of Food and Agriculture (SOFA) 2023. It looks at the substantial, but often hidden, costs to our health, environment and society, caused by our current unsustainable agri-food 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 reference document The role of real cost accounting in guiding agri-food companies and investments towards sustainability, prepared by TMG. The paper describes how True Cost Accounting (TCA) and lessons learned from its application in the private and financial sectors can inform efforts to develop a sound economic foundation for sustainability. TCA enables 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 on impacts on nature, people, the economy and society in financial terms, thus enabling integration into economic decision-making.