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  • Writer's pictureSustainable Agriculture Network

Transforming Food Systems: A Path to Global Prosperity, Sustainability, and True Cost Accounting

Updated: Feb 12

At this critical juncture in our world, we are confronted with challenges that demand immediate attention and transformative action. Among these challenges is the precarious state of our food systems, an integral part of our societies and a cornerstone of daily life.

Despite their remarkable feats in feeding a growing global population, our current food systems are marred by persistent issues, ranging from hunger and undernutrition to the obesity epidemic, biodiversity loss, environmental damage, child labor and human rights issues, and climate change. The economic toll of these problems exceeds 10 trillion USD annually, overshadowing the contribution of food systems to global GDP. It's evident: our food systems are destroying more value than they create.

The Urgency of Transformation

A recently released report by the Food System Economics Commission underscores the urgent need for a comprehensive transformation of food systems globally. Termed the Food System Transformation (FST), this initiative not only provides a viable solution to the global climate, nature, and health crises but also promises significant economic benefits. The report argues that neglecting the consequences of our current food systems will lead the world down a disastrous path.

The Costs of Current Food Systems

The costs associated with the current food systems are staggering, estimated at a whopping 15 trillion USD per year, equivalent to 12 percent of global GDP in 2020. These costs encompass health-related expenses due to non-communicable diseases, environmental degradation, structural poverty, and the vulnerability of food production to climate change.

Despite existing policy commitments, the current trajectory of food systems is projected to contribute to a 2.7°C increase in global mean temperature by 2050, resulting in severe consequences such as food insecurity, a surge in obesity, increased food waste, deforestation, and nitrogen pollution.

The Economic and Planetary Case for Transformation

The Food System Transformation (FST) offers a beacon of hope, providing a pathway to address the pressing challenges. The net benefits of this transformation are estimated to be worth 5 to 10 trillion USD per year, equivalent to 4 to 8 percent of global GDP in 2020. The FST envisions a future where undernutrition is eradicated, farmers enjoy sufficient incomes, land is protected and afforested, environmentally sustainable agriculture becomes the norm, and the food system becomes a net carbon sink by 2040.

Priorities for National Transformation Strategies

Transforming food systems is a complex undertaking, necessitating coordinated efforts at national and local levels. While there is no one-size-fits-all approach, the report identifies five broad priorities to guide effective national strategies:

1. Shifting consumption patterns towards healthy diets.

2. Repurposing government support for regenerative agriculture.

3. Targeting revenue from new taxes to support the transformation.

4. Innovating to increase labor productivity and workers' livelihood opportunities.

5. Scaling up safety nets to keep food affordable for the poorest.

Overcoming Challenges and Seizing Opportunities

The Costs and Affordability of Transformation

Implementing the FST pathway requires investments and transfers averaging 500 billion USD per year until 2050. These costs cover areas such as rural infrastructure, forest protection and restoration, reducing food loss and waste, supporting dietary shifts, and agricultural research and development. While the estimated costs seem significant, they are low compared to the economic benefits. Concerns about financing are acknowledged, especially for low- and middle-income countries, but at a global level, the costs are only 0.2–0.4 percent of global GDP and are deemed affordable.

The Hidden Costs of Our Food System: A Call for True Cost Accounting

The Food and Agriculture Organization of the United Nations unveiled the 2023 State of Food and Agriculture report, shedding light on the true cost of our global agrifood systems. The findings are nothing short of eye-opening, revealing the need for a paradigm shift across the entire value chain, from farmers and businesses to consumers, financial institutions, and nonprofit organizations.

For too long, our world has subsidized an extractive approach to food production. Conventional agriculture, driven by short-term crop yield goals, has inadvertently pushed our planet to its limits, perpetuating a cycle of unsustainability and volatility.

A new normal that needs to emerge for food production brings together governments, businesses, and the development sector in a new food financial architecture that allocates as much as US$400 billion annually towards the transformation of our food systems. This is far less than what inaction costs in terms of environmental, social, and economic harm, which has been estimated to account for up to US$12 trillion annually.

The Unsustainability of Conventional Agrifood Systems

The report highlights the glaring unsustainability and lack of resilience in agrifood systems, exacerbated by market, institutional, and policy failures that have generated substantial losses to society. To remedy this, decision-makers from the public and private sectors, including in civil society, need a comprehensive understanding of the costs and benefits inherent to agrifood systems. This understanding should encompass all stakeholders, including marginalized groups and future generations.

True cost accounting (TCA) emerges as a powerful tool to uncover the hidden costs of current agrifood systems, emphasizing their unsustainability and guiding the utilization of available levers to enhance outcomes. While TCA requires extensive data, especially in low- and middle-income countries, it is essential to leverage existing data to prevent inaction.

The report proposes a two-phase assessment process based on TCA. The initial national-level assessments aim to raise awareness, while subsequent in-depth evaluations prioritize solutions and guide transformative action.

Quantifying the Hidden Costs

A groundbreaking true cost accounting analysis of 154 countries unveils the "quantified hidden costs" of agrifood systems, though it acknowledges data gaps in many countries. These quantified hidden costs amount to approximately 12.7 trillion dollars at purchasing power parity in 2020, equivalent to nearly 10 percent of the global GDP in PPP terms. The urgency of factoring these costs into decision-making is undeniable.

A significant portion of these costs —73 percent— are linked to dietary patterns that lead to obesity and non-communicable diseases, resulting in labor productivity losses. The environmental hidden costs alone account for over 20 percent of the quantified hidden costs, equivalent to almost one-third of agricultural value added.

Addressing the Challenges

The quantified hidden costs pose a substantial burden relative to national income in low-income countries, necessitating a priority focus on poverty reduction, food security, and food safety.

Addressing the multifaceted challenges of agrifood systems is complex due to their intricate nature. Targeted assessments, focusing on critical sectors and issues, become indispensable. True cost accounting, with its ability to analyze dietary patterns, investments, organizations, and products, aids in identifying trade-offs and synergies between environmental and economic impacts.

Key Messages

  • Governments hold a variety of levers to transform agrifood systems based on targeted true cost accounting assessments. Repurposing subsidies towards incentives to enhance environmental sustainability and human health without reducing economic welfare is a necessary step for sustainable food production.

  • Private capital, which dwarfs global public support in the food and agriculture sector, plays a pivotal role in shaping sustainability. The widespread adoption of TCA can facilitate the correct implementation of these levers. To achieve this, barriers such as data scarcity, poor-quality data, and capacity gaps must be overcome, especially in low- and middle-income countries.

  • In the quest for a more sustainable and healthy agrifood system, governments, research organizations, standard setters, accounting firms, business consultancies, nonprofit organizations and NGO's, and financial institutions must collaborate to create an enabling environment for the scaling up of TCA.

  • It is imperative that we use the revelations from the 2023 State of Food and Agriculture report as a catalyst for change. The path to a sustainable agrifood system demands cooperation, informed decisions, and a steadfast commitment to addressing the true costs of our current practices.

  • Despite the daunting challenges associated with transforming food systems, there are reasons for hope. Citizen movements, farmers, businesses, and international declarations, such as the COP28 UAE declaration, signal a growing commitment to sustainable agriculture and resilient food systems.

By addressing concerns head-on, building broad-based coalitions, and emphasizing the public benefits, policymakers can navigate the challenges and unlock the immense benefits that transforming food systems can bring to people and the planet. The time for action is now.

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