A bar of chocolate for only 1 euro? Bargain! Low price, great joy for the bargain hunter! However, the truth is that the price of the chocolate bar is not low at all; the consumer simply does not pay it at the checkout. The real costs of a bar of chocolate become apparent only when one looks behind the scenes and considers the social and environmental impacts of the product. The true price of a bar of chocolate is paid by those who have to work under often adverse conditions, including illegal child labor and modern slavery on cocoa plantations. The true price is also paid by those who suffer from the possible environmental impacts caused by unsustainable cocoa cultivation. If people were aware of these social and environmental costs while standing in front of the candy shelf at the supermarket, they would probably be less inclined to unhesitatingly reach for the cheap chocolate bar.
So, what if the price of a product reflected its real costs to society and the environment? What if the cost calculation of a product not only considered direct costs, such as materials, production resources, labor, etc., but also indirect costs like environmental pollution and social inequality?
This is precisely the question that True Cost Accounting (TCA) addresses.
The principle behind True Cost Accounting
Determining the true costs of food and agriculture is about calculating the actual costs and benefits of different food production systems.
Many of our current food production systems have harmful impacts on the environment, animal welfare, and public health. However, these negative consequences are rarely accounted for and are neither paid for by consumers nor producers. Instead, we bear these costs in hidden ways, such as through water fees that include the cost of removing pesticides from drinking water, healthcare costs for diet-related diseases, or taxes that fund environmental remediation.
These hidden costs are often passed on to future generations or other countries, as is currently the case with climate change, deforestation of the rainforest, or loss of biodiversity.
However, True Cost Accounting considers not only the negative but also the positive effects of food production systems. These positive effects include, for example, the conservation and restoration of biodiversity promoted by sustainable farming methods, as well as the improvement of soil fertility and erosion control through practices such as crop rotation and green manure. The preservation of valued landscapes can also be a hidden service of agriculture that is not currently reflected in the price of a product and is therefore not compensated.
Isn’t it paradoxical, then, that the seemingly “cheapest” foods are often the most expensive for our health, society, and environment? And that sustainable and healthy foods, which predominantly have positive impacts, are very expensive and thus unaffordable for many people? True Cost Accounting offers an approach to correct this distorted pricing system.
Outlook
True Cost Accounting allows for the identification and evaluation of these external effects of food production, enabling products to be priced according to their true cost by identifying all positive and negative impacts. TCA facilitates the determination of essential data on the benefits of existing food systems, making it a reliable and crucial basis for policy decisions. It could serve as a political instrument in the future to create incentives for sustainable and healthy food consumption and to promote comprehensive transformation of food systems. By integrating the true costs of food into pricing—including ecological and social impacts—TCA can support policymakers in developing measures that reward sustainable practices and penalize environmentally harmful methods.
For example, taxes could be levied on environmentally damaging production practices, while subsidies could be provided for environmentally friendly and health-promoting agricultural practices. This would alter economic conditions and motivate both producers and consumers to make more sustainable choices. The reality is that political measures are necessary to create a global and sustainable food system that aligns with the goals of social justice and environmental protection.