Food

Hidden costs of food: UN suggests price restructuring to make healthy food affordable, sustainable

The omission of external costs destroys the environment, heightens food insecurity, health risks and festers social evils 

 
By Preetha Banerjee
Published: Wednesday 04 August 2021
Hidden costs of food: UN suggests price restructuring to make healthy food affordable, sustainable

The price of the food we consume is about a third the actual cost, which includes hidden cost to the environment and human health, according to a paper in the run-up to the United Nations (UN) Food Systems Summit.  

These hidden costs or ‘externalities’ that do not reflect in the market price of harmful foods makes sustainable and healthy food less affordable, the authors wrote in the paper.

The omission of external costs destroys the environment, heightens food insecurity, health risks and festers social evils such as underpayment of labour and inequality. 

The report titled The True Cost and True Price of Food stated: 

The current externalities were estimated to be almost double ($19.8 trillion) the current total global food consumption ($9 trillion). These externalities accrue from $7 trillion (range 4-11) in environmental costs, $11 trillion (range 3-39) in costs to human life and $1 trillion (range 0.2-1.7) in economic costs. 

To correct this, the value of food should be redefined, according to the group of scientists who wrote the draft. 

“True Cost Accounting (TCA), a tool for systemic measurement and valuation of environmental, social, health and economic costs and benefits” can be used to affix a more appropriate price to the food we consume, the intergovernmental organisation suggested.

More comprehensive analysis

The tool factors in natural, social and human capital when calculating an economy's productive assets, according to the paper. 

The authors said: 

A TCA assessment typically starts by identifying the goal and scope of the assessment, establishing the unit of analysis and the system boundaries. Then various externalities are assessed (qualitatively or quantitatively), valued and aggregated.

The availability and maturity of data for different kinds of externalities are not uniform, the scientists observed. For instance, the quantification of carbon emissions is relatively mature, whereas the quantification of health externalities is quite young and involves substantial uncertainty, the authors wrote. 

One tool for all

The tool holds different significance for the various stakeholders involved in food production, distribution and consumption, the researchers pointed out. UN suggested that the entire spectrum of people involved can utilise the tool in the following way: 

  • Governments can integrate TCA into local, national or regional policy and budgeting.
  • Businesses can use these structured assessments to minimize negative impacts and enhance positive benefits across value chains
  • Financial institutions use TCA for reporting, impact investment and risk assessment and obtain assurance on their published impact statement
  • Farmers can use TCA as a means to account for the costs and benefits of their agricultural practices
  • Consumers can use TCA to become aware of the environmental and social externalities embedded in the food they buy 

The benefits of true pricing of food are plenty but putting theory into practice is a major hurdle, the researchers noted. 

There is not enough understanding of “how to reliably measure, trace and account for externalities throughout the entire value chain of food products”, the report mentioned. 

Modern technology can be put to use to skirt these problems by “reducing the costs to store, communicate, validate, and process information”, according to the scientists. 

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