True Cost Accounting (TCA) makes the external costs and benefits of agriculture visible and comparable.
We calculate the positive and negative externalities per crop on an agricultural level. In doing so, we go one step further than calculating carbon footprints – the TCA calculation also takes into account aspects such as water, soil and biodiversity.
Our strength in considering the agricultural supply chain on a granular level also comes into play in TCA. Naturally, we use primary data from farms for our calculations, supplemented by reference data as necessary. The external costs of the global food industry are estimated to be around 20 trillion, twice the financial value of global food consumption.
If forage maize is grown intensively without undersowing, the soil is largely uncovered in spring. Heavy rainfall in the increasingly dry spring then leads to topsoil runoff, which can silt up rivers and encourage flooding. Taxpayers pay the repair costs for flood protection, while fodder and meat are cheaply available elsewhere. True cost accounting corrects the cost calculation of products for these externalities, i.e. external costs. The positive effects, such as carbon binding in humus-rich soils, are also taken into account.
As part of the “True Cost from Costs to Benefits in Food & Farming” initiative, we are working alongside partner companies from the agricultural, food and financial sectors to produce guidelines on how to create standardised TCA reports. Our common vision is to make the costs and benefits of agricultural production for nature and society visible in business reports and to financial institutions.
New guidance will be published in February 2022.