The global food system generates hidden costs as well as unrecognised benefits – so called externalities – due to environmental, social and health impacts caused by food production and consumption. Both negative and positive externalities constitute real costs that are not reflected in the economic system. For example, our global food system is responsible for around a third of total greenhouse gas emissions and is a driving factor in diet-related diseases such as type 2 diabetes and cardiovascular disease. At the same time, regeneratively managed soils make an important contribution to storing carbon, improving soil structure and increasing biodiversity on fields. These hidden costs and unconsidered benefits are nowhere accounted for – neither in business balance sheets, nor in the gross domestic product (GDP) of national economies. The result is market distortions and policy failures that create incentives for producers, investors and citizens to produce and consume food in unsustainable ways, putting food security and the economy at risk.

True Cost Accounting (TCA) is a methodology that aims to capture all costs and benefits associated with a product or service, including environmental, social and economic impacts. While TCA has gained increasing attention in recent years, there is still a lack of standardised approaches and tools to implement it effectively. Questions remain about how to integrate TCA into current reporting practices, how to support the internalisation of externalities through policy, or how to promote sustainable finance. However, this requires a wide range of expertise from different scientific, financial and policy fields. Due to the highly interdisciplinary and novel character of this approach, a large network of stakeholders bringing together knowledge and solutions from different fields of expertise and application is a great advantage for the further development and implementation of TCA.

The objective of the TCA Alliance is to create a German (and European) network and multi-stakeholder platform to build a common understanding and vision of why accounting change is needed across all sectors, and to raise awareness of the issue among policy makers, business leaders and consumers. Going one step further, the TCA Alliance will actively research and innovate on how to extend current accounting and reporting practices and drive the operationalisation of pilot projects to demonstrate and further develop the feasibility and utility of TCA in the private sector and for policy making. The aim is to develop concrete (implementation) proposals and recommendations for policy making that support sustainable financial and business practices. Together with project partners along the food value chain, true pricing, i.e., the calculation of negative externalities, and performance accounting, i.e., the calculation of positive externalities, will be carried out.

The project will start in 2024 and requires further funding. Please contact us if you are interested in supporting the initiative financially.