Industry, NGOs and policy experts have responded to the US$10.8 trillion deficit created by agrifood, addressing the health, social and environmental costs the sector creates but doesn’t account for. CEOs Address $10 Trillion Deficit
The World Business Council for Sustainable Development (WBCSD) and partners target their recommendations at CEOs, as well as investors and policy makers. CEOs Address $10 Trillion Deficit
- How is it that food costs us around twice as much as business accounts for?
- Why are CEOs paying attention to the unaccounted costs in the food system?
- How is the UN Food Systems Summit a good opportunity for discussing the food system costs currently not accounted for? CEOs Address $10 Trillion Deficit
The Scientific Group for the UN Food Systems Summit said earlier this year that while global food consumption is valued at $9 trillion, the sector creates unaccounted costs amounting to twice that figure at $19.8 trillion.
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They include $7 trillion in environmental costs, $11 trillion in costs to human life and $1 trillion in economic costs, meaning food is roughly one third cheaper than if these costs were included in market pricing.
The WBCSD’s report, The True Value of Food, to be released tomorrow, uses a cookie versus a portion of porridge to express the lost value in current accounting practices.
“Workers shoulder 29 cents of extra costs as a result of low wages and poor conditions”
The 55 cent cookie has a true cost of 89 cents when factoring in all impacts – and 63 per cent of those costs are currently hidden.
Of the further health, environmental and socio-economic costs, 13 cents is picked up by society, 14 cents is borne by the tax payer, and workers on the cocoa plantation shoulder 29 cents of extra costs as a result of low wages and poor conditions. These hidden costs include the impact of carbon emissions, water scarcity, air pollution, obesity, poverty and food waste.
The 55 cent portion of porridge, however, retains a true cost of 55 cents.
Emeline Fellus, Director of Food Reform for Sustainability & Health at WBCSD, explains, “The different ingredients you put in your cookie have a big impact on the environment, on social cost and in the end on the health of the person eating the cookie.
“You can choose to source cocoa from a farm that pays the farmers a minimum wage where you would have better impacts socially speaking, or not. And the cost of the cookie and the value it creates would be very different.
“The same goes if you add chia seeds which contain Omega 3, which are good for the health of the consumer, versus not.
“You create value by creating products that are more healthy and more sustainable”
“It’s critical to assess the impact of your business in an integrated way. It has the potential to really deliver against the main sustainable development goals, the main goals of the UN’s upcoming Food Systems Summit, and to transform our system in a much more thorough way than any small intervention here and there.
“We like to talk about value rather than internalising costs because you create value by creating products that are more healthy and more sustainable.
“You support a much more environmentally friendly society where people stop suffering from poor environmental impacts.
“We need a shift in the way governments have been thinking. They’ve been thinking in silos, so the health budget is not addressed in any relation to the agriculture budget.
“Deciding to subsidise one type of crop, such as corn, which may be turned into corn syrup, which may make sugar cheaper and may make the cookie rich in sugar cheaper, in the very end, will have negative impacts on people.
“This transformation is underway, CEOs need to act now”
“It’s all about understanding the trade-offs.”
Matthew Watkins, Manager for Food Reform for Sustainability & Health at WBCSD adds, “We’re providing some well-needed advice to CEOs because this transformation of our food system is underway. They need to act now.
“One of the businesses we work with is the commodity trader Olam. They’ve done some very advanced thinking in terms of food systems and economics.
“The CEO quite often talks about the need to invest in human capital, so he would like to spend more money on training, developing competencies, engaging employees.
“But if we look at current accounting procedures then these count as costs and it’s quite difficult to justify some of them.
“Businesses know these unaccounted costs in the food system are real risks”
“It’s only really once you start taking a more holistic picture of the value of people and nature that we can see them as investments, as value that is retained for the business.
“Businesses know that these unaccounted costs in the food system are real risks that need to be dealt with now. They know they need to change. They know some of these costs will be internalised within food system economics and business accounting in the future.
“Our recommendations also help explain how a business creates wider value in society. In particular it helps to communicate that value to financial markets.”
Emeline Fellus says, “We are hopeful that True Value of Food is one concept that will be quoted once or even many times during the plenary of the Food Systems Summit this month, and that governments are starting to integrate it.
“Investors are also key stakeholders. We’ve seen growing interest from investors in ESG reporting and pressure is increasing, but we are hoping for much more.
“Every CEO is experiencing direct or indirect pressure”
“The Food Systems Summit offers an opportunity to bring everybody around the table. We are really hopeful that this True Value of Food will be taken up by other stakeholders.
“Business is looking to policy to install a level playing field. For example, companies that are actively re-formulating to reduce the level of sugar in their products sometimes lose market share because their competitors don’t.
“Most consumers tend to buy more sweet products because it feels nicer. That’s why policy making is so important.”
According to the report, “Every CEO is experiencing direct or indirect pressure leading to changes in current and new, emerging profit pools.
“Food and beverage companies now have stricter sustainability requirements for their suppliers. Governments globally are implementing regulations on environment and health, such as taxes on CO2 emissions and sugar.
“The competitive landscape is also being changed by investors in new or improved food solutions as the Food Tech industry booms.”
Its cases studies include Royal DSM a Dutch science-based company, commodities giant Olam, and Danone.
“We’re starting to build this coalition and we’re hoping other organisations will participate”
Matthew Watkins says, “We were keen to identify examples of where leading businesses are already working on this topic.
“As WBCSD we have a group of around 20 businesses we work with closely on the True Value of Food. [These include Bayer, Syngenta, Rabobank, Nestlé, and OCP Group.]
“We were able to interview a selection of these businesses around the processes they are putting into place, around pilot studies they’ve already carried out, and distil that down into some of the key recommendations. They are suggestions for businesses that are a bit less advanced or maybe starting to think about the topic.
“For the Food Systems Summit we’re delighted to be participating with a wider coalition of organisations that are working on the topic, which brings together more businesses and additional stakeholders from NGOs, policy makers and others.
“Everybody around the table recognises the need to work in a multi-stakeholder environment in order for this topic to really take off.
“We’re really starting to build this coalition and we’re hoping other organisations will participate and grow this over the coming weeks and months.”