There has been no lack of reports in the last decade on the failures of modern economic systems in relation to sustainable natural resource management. The world’s production systems – agriculture, forestry and fisheries – are leading to the widespread degradation of land, water and ecosystems, significant greenhouse-gas emissions, biodiversity losses, and livelihood stresses for local communities worldwide. Yet, by and large, accounting systems notice nothing amiss.

Calls for accounting that encapsulates the true cost of production – not just in food and agriculture, but in all aspects of natural resource management – are increasingly prominent and compelling. They originate from a widely held perception that many aspects of our current economic systems are faulty or inadequate, while policy decisions continue to be made on this fragile basis. Far too often, economic transactions place a price on the commodities harvested but do not address, nor pay for, the many “externalities” they generate – such as loss of access to natural resources by local communities, soil erosion, carbon emissions, biodiversity loss, impacts on human health, and the debilitating effects of chronically low wages.

Negative externalities are not new; they are a form of market failure that has existed for as long as markets have existed. But current global economic structures, with vastly increased technological growth, international financial flows and global trade, and the institutionalization and dominance of the price-based market model, have led to the massive externalization of costs in natural resource production systems, aided and abetted by the sectoral organization of governments.

A cohesive consensus on the solutions and policies that will genuinely transform our natural resource economies is still underdeveloped, much less taken up by policymakers and practitioners. It is this major paradigm gap we have attempted to fill by publishing an edited volume of articles titled True cost accounting for food: balancing the scale:  to broaden the discussion of emerging policy options and to inform subsequent actions. In this opinion piece for Baobab, I highlight aspects of this approach I believe are particularly relevant to Africa and its small-scale producers.

The limits of sectoral thinking and planning

For reasons of political or economic expediency, or as a result of historical legacies, national governments typically organize the governance and administration of their productive activities, encompassing inherently complex socioeconomic systems, into distinct “sectors”. This may also be reflected in institutions supporting natural resource management. Most nations exercise this public function through separate ministries of (for example) agriculture, forestry, fisheries and health.

But natural resource management – like other socioeconomic and ecological systems – cannot be confined to a single sector because this does not reflect how the sectors function in nature. True-cost accounting (TCA) asks that we manage our resources through a holistic lens, evaluating the full and actual costs and benefits of different production systems. And it asks that we try to understand the different impacts, links and dependencies between natural systems, human systems and production systems. By being wedded to sectoral approaches, decision-makers can lose sight of the interdependence of the different components of what, in reality, is an integrated whole. Ignoring underlying interdependencies when attempting to fix or enhance a given part of the system often results in unintended consequences elsewhere.

Calls for the adoption of TCA are not new but are being increasingly cited and with greater urgency in international forums, including major global events such as this autumn’s UN Food Systems Summit. It is crucial that the far-reaching international policy development opportunity offered by the Summit is a genuine effort to capture the unfair allocation of negative externalities across borders and not diluted or deflected by language that conveys a false sense of environmentally friendly products, aims and policies (otherwise known as “greenwashing”).

Showing the impact of TCA

In a chapter in our book, Salman Hussain shows the consequences of making land-use decisions based on financial flows without addressing either negative or positive externalities.[1] In such circumstances, monocrop intensive agriculture appears to be the winning choice. But if all positive and negative impacts are included, the situation changes, such that agroforestry is a better option than monocrop agriculture. Projecting into the future, we can see that the advantage – financially but also with environmental and social benefits – of agroforestry over monocrops continues to grow, when externalities are accounted for. It is striking to reflect on the broad range of biodiversity benefits and ecosystem services that a crop can generate, as well as how government policies that do not sufficiently support smallholder farmers can serve as an impediment to the flow of such services.

The four “capitals”

The United Nations Environment Programme’s TEEB AgriFood initiative delineates costs and values across four types of “capital”: natural, human, social, and produced. This framework is being used to create tools to enable businesses to develop comprehensive profit and loss reports that, among other things, integrate the value added or lost.

Tim Crosby and co-authors provide an example from Zambia.[2] There, a public-good, non-profit company, Community Markets for Conservation (COMACO), has been working with 81 community cooperatives in the Luangwa Valley since 2009 to provide incentives for biodiversity conservation, as well as training and support to 188,500 small-scale farmers in agroforestry, organic composting, minimum tillage, crop rotation, and water conservation strategies. The company also runs a business to manufacture and sell 17 healthy, pesticide-free, organic, value-added foodstuffs under the brand It’s Wild!, with products such as peanut butter, rice, wild honey, wild mushrooms, dried mango, a soy-based high-protein snack, and breakfast cereals. COMACO’s success lies in a four-level landscape-conservation approach, including payments to reward collective “Conservation Pledges”, conservation-area set-asides, and soil enhancement practices.

COMACO scores well on all four of the capitals, but its emphasis is on increasing human and social capital. Increased pay for crop production is linked to meeting household food security, the adoption of organic farming techniques for increased food production, and the absence of poaching and forest threats. By associating the adoption of improved farming techniques with enhanced household nutrition and income, COMACO puts farmer ownership at the heart of the work, an intentional strategy that reinforces linkages between different kinds of capital. COMACO found that having the four areas of capital in one analysis was a helpful way to communicate the impact of the entire enterprise – which no doubt is useful for marketing goods internationally and attracting donors, as well as for convincing communities to adopt the model.

Influencing markets and consumer choice

The increased awareness of some manufacturers to growing market demand for sustainably produced goods can result in production changes that internalise previously external costs. An example, provided by Adrian de Groot Ruiz, is the Dutch company Tony’s Chocolonely, which aims to produce “slavery-free” chocolate bars.[3] Tony’s has built a value chain that sources cocoa from smallholder farmers in Ghana and Côte d’Ivoire, who produce the lion’s share of the world’s cocoa. Through its “bean-to-bar” programme, Tony’s estimates the true “social price” of its chocolate bars by factoring in the external costs arising from, for example, the underearning of farmers, the underpayment of workers, child labour, and worker harassment. In line with its findings, the company has started paying closer to the true market price for its cocoa. The company needed to increase its retail price in order to pay farmers more, and it explained this to customers to enable them to make informed choices on their purchases. The approach has been commercially successful, with Tony’s now one of the Netherlands’ largest chocolate brands, surpassing some traditional chocolate giants.

Conclusion

To address the implications of the narrow sectoral organization of a given system and to devise sustainable systemic solutions, we need to start by defining the system’s structure and function, the main interdependencies and energy/capital flows within that system, and the boundary conditions of that system. Such a framework – which TCA can provide for agricultural production – can help reveal critical points where targeted interventions could lead to desired system-level outcomes.

Overall, the chapters in our book point towards a pathway for developing production systems that are more human-centred than profit-centred and that embody a more respectful relationship with the planet, and its residents. We know that enough food is produced to feed an even greater population than we have now on earth,[4] but our food systems are not delivering this equitably, and in ways that sustain the earth’s ecosystems.

Thus, the time to reset the system is now. Our book presents several approaches (e.g. El-Hage Scialllaba and Obst, 2021; Sandhu et al., 2021),[5] coalescing around ways to measure production systems for public and planetary health and to act on this information.

The adoption of TCA in Africa could have far-reaching implications for policymaking. In moving forward, however, it is important to recognise that, in matters of international trade, African agricultural products comprise only 2–3 percent of globally traded commodities. Success in Africa requires that far bigger players also come on board; otherwise, it risks making its minority products uncompetitive in markets where pricing is not reflective of TCA principles.

Nevertheless, African initiatives can be launched, an example being the application of the TEEB framework to rice value chains in Senegal (a study not included in the book): there, investment in farmer training and community-scaled rice milling infrastructure, as opposed to large-scale rice production schemes, was shown to have strong impacts, not just on the reduction of costly rice imports, debt servicing and undernutrition but also on enhancing women’s empowerment and youth employment.[6] Being able to step back and assess the many social and environmental interlinkages in critical policy decisions – being able to “see the forest for the trees” – would be a substantial contribution to securing a sustainable future for the continent. TCA is currently being considered more in the Global North (for example, the Government of the Netherlands is looking at adopting TCA standards in accounting procedures), and its relevance to sub-Saharan Africa remains to be explored. Nevertheless, systems of assessment that value some of the continent’s greatest assets – its people and natural resources – surely have resonance for Africa. As suggested by the Senegal study, a viable starting point could be the use of TCA by governments in weighing their investment decisions with development banks. TCA can also facilitate the input of diverse stakeholders into such decisions, which have long-term implications for the citizens of every country.

(i) Dr Barbara Gemmill-Herren, Associate Faculty, Prescott College, Senior Associate to World Agroforestry Centre, Nairobi, Kenya

True cost accounting for food: balancing the scale, edited by Barbara Gemmill-Herren, Lauren E. Baker, Paula A. Daniels

Published by Routledge, copyright year 2021; the electronic version can be downloaded for free. https://www.routledge.com/True-Cost-Accounting-for-Food-Balancing-the-Scale/Gemmill-Herren-Baker-Daniels/p/book/9780367506858

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[1]Hussain, S. 2021. An introduction to TEEB. In: Gemmill-Herren, B., Baker, L.E. and Daniels, P.A., eds. True cost accounting for food: balancing the scale. Routledge.

[2] Crosby, T., Astone, J. and Raimond, R. 2021. Investing in the true value of sustainable food systems. In: Gemmill-Herren, B., Baker, L.E. and Daniels, P.A., eds. True cost accounting for food: balancing the scale. Routledge.

[3]De Groot Ruiz, A. 2021. True Price Store: guiding consumers. In: Gemmill-Herren, B., Baker, L.E. and Daniels, P.A., eds. True cost accounting for food: balancing the scale. Routledge.

[4]Berners-Lee, M., Kennelly, C., Watson, R., & Hewitt, C.N. 2018. Current global food production is sufficient to meet human nutritional needs in 2050 provided there is radical societal adaptation. Elementa: Science of the Anthropocene, 6(1).

[5] El-HageScialabba, N. and Obst, C. 2021. From practice to policy: new metrics for the 21st Century. In: Gemmill-Herren, B., Baker, L.E. and Daniels, P.A., eds. True cost accounting for food: balancing the scale. Routledge; Sandhu, H., Regan, C., Perveen, S. and Patel, V. 2021. Methods and frameworks: the tools to assess externalities. In: Gemmill-Herren, B., Baker, L.E. and Daniels, P.A., eds. True cost accounting for food: balancing the scale. Routledge.

[6]Gemmill-Herren, B.,van Dis, R., Ndiaye, T., Sene, J. M. W., Yimer, H., Zuellich,G. and Sene, S.O. 2019. A Holistic Lens on Rice Value Chain Pathways in Senegal; Application of “The Economics of Ecosystems and Biodiversity for Agriculture and Food” Framework. TEEB for Agriculture and Food, UNEP.