True Cost Accounting (TCA) makes the environmental impacts of agriculture visible and comparable. This is because the innovative method translates environmental criteria into monetary figures. In this way, benefits and costs incurred by agricultural practices for the environment can be expressed in a very concrete way that is comprehensible to everyone.
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.
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. If benefits are created, these 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.
Beyond this, we will be setting ourselves further homework in the future. After all, aspects of social and human capital cannot yet be adequately presented in True Cost Accounting.