Launched this week, the UN Food and Agriculture Organization (FAO) issued its annual State of Food and Agriculture 2023 report with a timely thematic focus: True Cost Accounting (TCA). Taking into account the externalities typically excluded from economic assessments, TCA has emerged as a pioneering holistic framework to factor social, human, and environmental costs and benefits into food systems decision-making. 

In its groundbreaking TCA evaluation of global food systems, this year’s edition of FAO’s flagship report finds the expected hidden costs of food and agriculture in 2020 was USD $12.7 trillion — nearly 10% of global GDP. 

In the face of pressing global challenges such as the alarming loss of biodiversity, the climate crisis, the pervasive issues of malnutrition and hunger, and persistent social inequities, swift and radical action on food systems transformation is paramount. Yet, as we approach COP 28 in the United Arab Emirates – where food systems transformation has been named as a major priority of the host country – the urgency of the challenges we face demands that we identify and pursue policies and solutions with the potential for true impact.

As world leaders and policymakers get ready to convene in Dubai for COP 28, it is crucial that they recognize the compelling evidence delivered by FAO’s report, act boldly and embrace measurable, transparent approaches like TCA to move us forward. 

Accounting for hidden costs

Laying bare the evidence on multiple indicators, FAO’s report reveals that the food we eat, from soil to spoil, is laden with hidden costs. 

The report estimates that 73% of these hidden costs stem from unhealthy dietary patterns, driven by systemic failures like food insecurity and the overproduction and consumption of ultra-processed foods. One-fifth are environment-related, from greenhouse gas and nitrogen emissions, to land-use change and water use. Social costs make up 4% of the total hidden costs of agri-food systems, and are driven by poverty and undernourishment predominantly in low-income countries.

FAO further details the sources of hidden costs in 154 countries around the world and urges national leaders to harness these insights and conduct targeted TCA assessments to identify entry points for transformative food systems action. With this report, FAO also announced that next year’s State of Food and Agriculture will – for the first time in the report’s 75-year history – continue on the same theme, offering examples of how targeted TCA assessments can deliver solutions to global challenges.

FAO’s report is a resounding endorsement of the power of TCA as a holistic evaluative framework—compelling policy leaders to embrace it as a critical tool to forge more transformative and sustainable food systems. It is also a testament to the work of hundreds of individuals and organizations in the TCA Community of Practice, whose tireless work to raise awareness of the hidden costs and benefits in food systems led to this moment.

Empowering effective decision-making

Beyond simply reinforcing the need to change our existing food systems, the true strength of TCA is as a transparent tool for policymakers to assess the trade-offs and synergies of possible interventions, and adopt the pathways that offer maximum value for both people and nature.

Measuring more than just productivity can support integrity in decision-making, as a UN Environment Program’s (UNEP) study on potential government-funded transitions to organic rice production in Northeast Thailand exemplifies. Modelling the outcomes of four scenarios, the findings illustrate that the widespread adoption of organic practices in the region could deliver huge benefits to biodiversity, climate, and human health—all while keeping yields stable. Significantly, the prohibition of burning practices under organic production was projected to remarkably improve respiratory health for residents of the region, with a staggering reduction in long-term government health spending if they invest in organic agriculture. 

Meanwhile, a recent TCA study on the work of the Andhra Pradesh Community-Managed Natural Farming (APCNF) program gives legitimacy to the systems-wide benefits offered by a government-supported transition to farming grounded in principles of agroecology. Comparing the social, health, environmental and economic outcomes of different farming systems in Andhra Pradesh, India revealed that APCNF offers the most transformative benefits to communities, from supporting dietary diversity and health to empowering women and encouraging inclusive development.  

The evidence is clear: harnessing a TCA framework can empower governments to design effective food and agriculture policies that yield both long-term savings, and co-benefits in alignment with multiple Sustainable Development Goals (SDGs).

A seminal moment for TCA 

FAO’s report is a major milestone in the recognition of TCA by the global community. And its timing is critical: with COP 28 convening at the end of the month, there is a growing appetite for a transformation of our broken food and agriculture systems. Amidst our passion for urgent change, we must ensure that we do not throw vital time and money at false solutions. 

We need to dramatically change the way food is produced and consumed. With a suite of different approaches on the table for how leaders at COP 28 can intervene in the food system, the FAO’s improved methodology for valuing hidden agri-food system costs is ideally placed to support decision-making that has the best return on investment for both people and nature. 

Instead of dwelling on past failures in our food systems, True Cost Accounting offers a future-oriented approach, providing us with the critical foresight needed to take the right direction. The challenges we face are too great to follow the wrong path, and we urgently need the international community to elevate and integrate frameworks which go beyond economic valuations to measure what matters: health, equality and a thriving planet for all.

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Jenn Yates
Director, TCA Accelerator
The TCA Accelerator is an Allied Initiative of the Global Alliance for the Future of Food