True cost accounting
[1] The approach moves beyond purely economic thinking with the aim of improving decision-making in commercial organizations and in public policy.
It aims to reveal the impacts of economic activities on society as a whole, in addition to the private costs directly incurred by producers and consumers.
These can be environmental, health or social impacts that are not reflected in the market prices of products and services, i.e. not included in the operational profit and loss accounts, and so are regarded as hidden.
[8] Over the last decades, monetary values have been assigned to externalities where businesses are penalized, or when insurance firms calculate costs in industrial accidents.
[10] An application of TCA tends to include a dozen or more indicators selected to measure and value positive and negative impacts across the environmental, health, social and economic domains.
The aim was to address the core theoretical issues and controversies underpinning the evaluation of the relationship between the agrifood sector, biodiversity and ecosystem services, and the impacts on human health on a global scale.
The United Nations Environmental Programme defines it as “an evolving holistic and systemic approach to measure and value the positive and negative environmental, social, health and economic costs and benefits to facilitate policy, business, farmer, investor and consumer decisions.”[17] The True Cost Initiative proposes a similar definition but uses the term “methodology” instead of “approach”.
In addition, this definition of TCA considers both “costs and benefits” and should value all impacts making them visible whether they are the environmental, social, health or economic.
[3] Flows and impacts related to natural, social and (part of) human capital, in contrast, are not, so their inclusion in economic assessments is largely partial and not systematic.
The scope of these studies differs depending on the research question being addressed, the geographical coverage and the hidden impacts to be included in the analysis.
For example, environmental externalities such GHG emissions are easy to include in any TCA analysis due to a wide availability of relevant data.
[25] In 2019, a study by the World Bank estimated the hidden costs of foodborne diseases (from unsafe food) in low and middle-income countries and found these to amount to USD 95.2 billion.
Differently from the other two studies, the FAO report assesses hidden costs of agrifood systems at the national level for 154 countries.
[29] A study based in the United States reported nearly $2 trillion in hidden health and environmental expenditure, which disproportionately burdens communities of color.
[35] A study conducted by Tufts University in the United States reviewed the health equity and economic benefits of medically tailored meals (MTMs) and produce prescription programs.
