The world’s food systems impact people and the planet. They have the power to both nourish and degrade, generating unaccounted positive and negative value for society - cumulatively known as “externalities”. Understanding these externalities – and adjusting business models and policies to internalize them – is a critical lever in driving food system transformation.
The global food system generates “hidden” environmental, health and poverty costs – estimated at almost $12 trillion a year. This number is larger than its market value of $10 trillion. These unconsidered externalities are a significant and growing burden on the planet and society. While it’s not easy to measure and value impacts and dependencies in the food and agriculture sector, true cost accounting remains an important tool in reducing risk, optimizing business performance, internalizing negative externalities, demonstrating positive contributions and value creation, and ensuring the food system revitalizes people and regenerates the planet.
By measuring and valuing the impacts generated by doing business, understanding dependencies on natural, social and human capital, and using this information to better assess risks to and opportunities for business models, the planet and society, companies equip themselves to be leaders for the long-haul. True cost accounting helps companies communicate their true value creation and performance – both positive and negative – to capital market participants and policymakers. Over time, disclosing this information will reorient policy and channel capital flows to less risk-prone and more sustainable companies.
We are working to drive system-wide transformation by helping agri-food companies measure and manage their impacts, dependencies and risks; and raising investors’ awareness about these. We encourage the use of multi-capital accounting to support internal decision-making and to inform investors on material agri-food sector risks and how companies are managing them. By encouraging more consistent impact valuation approaches, we envision a clear progression to better internal planning, stronger and more decision-useful external reporting, and shifts in capital flows and policy to reward the most sustainable companies.