How can agrifood systems hidden costs and benefits be effectively incorporated into decision-making for transformation?

Agrifood systems are invaluable to society. However, they also contribute to climate change and natural resource degradation while failing to provide healthy diets to all. Many of these impacts are not included in market prices and are thus hidden.

In 2023, FAO’s flagship publication “ The State of Food and Agriculture (SOFA) 2023” introduced the concept of hidden costs and benefits of agrifood systems and provided a framework through which these can be assessed. By presenting the results of national-level  true cost accounting (TCA) assessments for 154 countries, this report estimated that the global quantified hidden costs of agrifood systems amount to 10 trillion 2020 purchasing power parity (PPP) dollars or more, and called for factoring these costs into decision-making to promote agrifood systems transformation towards sustainability.

Given the relevance of this topic, for the first time since the launch of the SOFA publication in 1947, FAO is dedicating two consecutive issues to the same theme. In fact, the 2024 edition of the report will showcase the flexibility of TCA in its application to different scopes. Through a set of case studies, it will demonstrate how important, as well as challenging, it is to incorporate hidden costs into decision-making to evaluate different policy and management options for agrifood systems transformation.    

Don’t miss the opportunity to contribute to the discussion!

Check the FSN Forum – FAO’s open, neutral platform for multistakeholder dialogue – and contribute to the open call for submissions to share examples of existing or ongoing assessments of hidden costs and benefits of agrifood systems to ensure a wide range of coverage around the globe and across sectors.

To participate in the call for submissions, click  here.

If you want to dig deeper, browse through the selection of titles below.

The State of Food and Agriculture 2023. Revealing the true cost of food to transform agrifood systems
This year's edition looks at the true cost of food for sustainable agrifood systems. The report introduces the concept of hidden environmental, health and social costs and benefits of agrifood systems. It proposes an approach – true cost accounting – to assess them.

Policy brief

Revealing the hidden costs of agrifood systems to enhance their value
According to this policy brief, targeted and context-specific TCA assessments that also consider the costs of different abatement actions are needed to inform decision-makers on how to leverage policy, regulation, standards, and private capital for a transition towards sustainable agrifood systems.

Background papers

Hidden costs of agrifood systems and recent trends from 2016 to 2023
This paper examines the annual hidden costs of agrifood systems for 154 countries, including environmental costs related to greenhouse gas emissions, and social ones associated with undernourishment and poverty. It reveals that they disproportionately burden low-income populations, posing a threat to future growth and development if left unaddressed.

Accounting agrifood systems hidden costs in data-scarce contexts to inform policy
This paper reviews the methods and data required to estimate the hidden environmental, social and health costs associated with agrifood systems. The studies reviewed in the report demonstrate that these hidden costs are considerable, and highlight the need for action at global, national and local levels.

The role of true cost accounting in guiding agrifood businesses and investments towards sustainability
Current practices in business accounting and reporting are hindering the transition to sustainability in the agrifood sector. This paper describes how the application of true cost accounting and the lessons learned from it can lead to a sound economic foundation for sustainability in business and finance within agrifood systems.

True cost accounting applications for agrifood systems policymakers
Global agrifood systems incur substantial hidden costs. This paper introduces true cost accounting (TCA) as an approach to measure and value these costs and benefits, facilitating improved decision-making. It also analyses how TCA can support the transformation of agrifood systems and provides an overview of the different stages and steps required to conduct a TCA study.