Calculating the true costs of the food we consume is a bit more complicated than simply adding up all our grocery bills and dining receipts. “We pay for food in many ways, not just at the checkout,” writes the Sustainable Food Trust, the global voice for sustainable food and health.
A true cost accounting in the food industry has to take into account how the food is produced and how its consumption contributes to our healthy (or not so healthy) diet.
Consumers may think that those food bills and receipts are their final tally in the food supply chain, but there are hidden costs that consumers must pay from increased water charges, higher taxes, environmental clean-up costs, and increasing health insurance premiums.
Wendy Schmidt, President of the Schmidt Family Foundation, argues that we must, “Re-shape the road map and better design a food system which takes into account all the externalities that are currently not included in the cost of food.”
True cost accounting looks at the entire food supply chain and the effect it has on our environment, climate, communities, and public health.
What is True Cost Accounting
True cost accounting is a complex subject, so you are not going to find an app on your
smartphone to do the math for you.
The Sustainable Food Trust defines it as, “The discipline of True Cost Accounting enables us to understand more about the scale and nature of these ‘externalities’, as economists call them, by identifying, categorizing, and quantifying, and where possible pricing all the different costs and benefits involved.”
“A Tale of Two Chickens” video also attempts to define True Cost Accounting.
There are no shortcut solutions when it comes to True Cost Accounting but the subject could have dire consequences for future generations as our food production and consumptions relates to climate change, soil degradation, rainforest destruction, species extinction, and diet-related diseases.
Hidden Food Costs Examples
At the “True Cost of American Food” conference held in 2016, the hidden costs of different elements of food production and preparation were highlighted including:
- The hidden costs of chicken on our plates: According to Oliver Gottfried, Senior Advocacy and Collaborations Advisor, Oxfam America, Americans per capita consumption has tripled in the last 50 years with the average American eating 89 pound of chicken every year. While whole chickens were bought and consumed in the past, today 90 percent of chicken on the market is processed with 8.6 pounds of chicken produced every year in the United States. Poultry factories require workers to process between 35 and 45 chickens per minute. The true price of chicken on our plates must factor in the health of the workers and their near-poverty employee wages that qualify many for government assistance.
Four years after the conference the health factors in this industry were highlighted in the early stages of the COVID-19 pandemic with the CDC reporting, “COVID-19 cases among U.S. workers in 115 meat and poultry processing facilities were reported by 19 states. Among approximately 130,000 workers at these facilities, 4,913 cases and 20 deaths occurred. Factors potentially affecting risk for infection include difficulties with workplace physical distancing and hygiene and crowded living and transportation conditions.” - The hidden costs of concentrated animal feeding operations (CAFOs): According to Leah Garces, Compassion in World Farming, that current U.S. feed requirements are not sustainable with one-third of all cereals and one-third of global fish production going to animal feed. The land used for U.S. feed is roughly the same size as the European Union. An estimated 1.7 million people could be fed with the land currently used for livestock feed production and another 2 million people could be fed with the food lost or wasted in the current system.
- The hidden costs of palm oil production: According to Libby Bernick, TruCost, the palm oil industry was small in the 1990s but grew to a $50 billion industry by 2016 with extensive clearing of rainforest in SouthEast Asia to produce palm oil exported to China, Europe, and the U.S. The clearing of the rainforest has consequences for the planet and climate change. Peat is also burned when clearing the land, resulting in air pollution that travels as far as 700 miles. Indonesia has become the third largest greenhouse gas emitter in the world behind only the United States and China. One study found that palm oil environmental costs were $43 billion yearly, almost equal to the entire production of the palm oil industry.
“It would be no exaggeration to state that the current food pricing system is dishonest, in that it fails to include the hidden impacts of the production system, both negative and positive, on the environment and public health,” said Patrick Holden, Founder and Chief Executive of the Sustainable Food Trust
Breakdown of Hidden Food Costs
According to GreenMatch for every dollar spent on food, the true cost is $2 with a breakdown of the extra dollar spread between:
- Diet-related disease 37.3 percent
- Natural capital degradation and biodiversity loss 36.3 percent
- Production-related ill-health 13.4 percent
- Farm support payments, research, and regulations 7.8 percent
- Imported food 5.2 percent
Consequences from this system not only include the consumers paying double for their food, but the enablement of environmentally damaging practices and the discouragement of sustainable production.
- What can consumers do? Options include:
- Demand increased transparency about the hidden and true costs of food.
- Make sure food imports are sustainably sourced.
- Supports initiatives for healthier food and benign production.
- Maintain healthy and sustainable diets.
Contact FreshByte Software today about our total Produce Traceability Initiative (PTI) capabilities that can help you meet consumer’s growing preferences for transparency in the food chain.
