True Cost Accounting: transparency about the costs of food and food production

True Cost Accounting is alive and well. It is a first step towards more sustainable production chains for food, feed and non-food, because it clarifies the unwanted (side effects) in the production chains and puts a price tag on it. This is the conclusion of the researchers who carried out the True Cost Accounting quick scan.

“There are many initiatives in True Cost Accounting in the Netherlands,” says Marieke Meeusen, project manager and researcher at Wageningen Economic Research. “We looked at nearly 50 initiatives: 19 focused on Business to Business (B2B), 15 focused on Business to Consumer (B2C) and 11 initiatives that were primarily used internally.”

What is it?

True Cost Accounting (TCA) is about making it clear in certain production chains which sustainability effects are taking place and what the costs are. It provides insight into external costs and benefits. Meeusen: “Where are the problems in terms of sustainability? Where is the social misery? And what does it cost, how can it be expressed in money. The market parties would like that to be clear. Once this is clear, they can also do something about it. But that starts with making those negative effects transparent.”

The negative effects may play a role in the social or human domain, such as lifetime income; living wage, but also child labour, or in the environmental field, such as CO2 emissions, water or nitrogen pollution. In the food production chain, the researchers see a lot of attention on large raw materials such as coffee, cocoa and bananas. Both environmental and social issues play a role here. Specific Dutch foods have been studied for the Dutch market: milk, potatoes, green beans, meat. Where the social topics focus on the environment and animal products, emphasis is placed on animal welfare, for example.

Real price

Many of the Dutch initiatives include a calculation of a real price. Different methods are used, such as an economic approach (with marginal damage costs) and a more legal approach based on rights (remedial costs). In addition, companies see TCA as a way to inform consumers so that they can make a sustainable choice. Some also conduct experiments to pass on the additional price to consumers. “But this is, above all, very complicated; moreover, in these economic times with rising food prices, an even higher price is not desirable,” says Meeusen.

The quick scan was carried out within the Public Private Partnership (OPP) ‘True Price: from Insight to Action’. “The partners needed such an overview. This helps them find others, establish contacts with them and strengthen their network. Ultimately, TCA is a first step towards more sustainable production chains, where we also contribute to Wageningen University & Research’s mission to improve the quality of life,” concludes Meeusen.

PPP ‘True and fair price’ and PPP ‘True Price: from insight to action’

Food production has social costs that are not reflected in food prices. In the PPP ‘True and fair price for sustainable products’, these social costs are taken into account so that a real price for food can be calculated. True Cost Accounting (TCA) is used for this. It is the calculation of external costs and benefits. True Pricing is about determining and communicating the true price. True pricing aims to reduce external costs.

In the PPP ‘True price: from insight to action’, emphasis is mainly placed on what the various actors can do to ensure that food has fewer negative effects on the environment and society.

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