The hidden cost of ‘cheap food’ is a dark secret that the industrial food industry would really like to keep that way. Now, finally, it is being exposed. Jim Manson reports.
Why it is that food that makes us sick and is disproportionately damaging to the climate and environment is so cheap? It’s an important question, and one that a lot of powerful organisations and businesses would prefer that we didn’t ask.
The illusion of cheap food perpetuates the idea that organic, healthy and artisanal foods are expensive and ‘elitist’ – a favourite narrative of organic’s critics. This creates real challenges, not least because consumers typically cite price as the biggest factor preventing them from buying organic. Making the case for higher food prices during a cost of living crisis, is even harder – and politically fraught.
Nevertheless, in the last few years there has been a concerted effort from a broad range of actors to start a wider debate on this politically charged issue.
Stark findings
Studies on both side of the Atlantic have produced stark findings about the hidden cost of food production. For example, a landmark report by the Sustainable Food Trust (SFT) – The Hidden Cost of UK Food – showed that for every £1 spent at the checkout, another £1 is spent in hidden ways. Translated nationally, it means that UK consumers, who spend £120 billion on food in a year, also rack up a further £116 billion in environmental and health costs – costs that are not paid for by agrifood businesses, but instead passed on to society.
Globally, the hidden social, environmental and health costs of agrifood systems could total as much was $12 trillion, according to 2020 FAO research. And while the majority of these hidden cost are generated in high income countries, their greatest economic burden falls on poorer countries, where they can reach nearly a quarter of GDP1.
The scale of the public health implications of food systems dominated by cheap, unhealthy foods was illustrated in a 2022 paper3 which classified 89% of the world’s top 20 food companies’ brand sales as unhealthy. The British food writer, Bee Wilson, says the finding shows the extent to which the “system is rigged against us” and that “we need a new economic food model”. It also exposes the culpability of the world’s leading food multinationals in creating the obesogenic environment responsible for record levels of chronic ill health.
True cost
To assess both the negative and positive impacts of different types of food and farming systems, researchers talk about externalities – meaning the costs that are not reflected in the market price. In recent years the concept of ‘true cost accounting’ – a holistic approach to measuring the real costs of a product or service – has increasingly been applied to food systems.
The prospect of governments introducing taxation or incentive schemes to ‘correct’ distorted food prices may still be a way off, but a growing number of progressive businesses have been trialling true cost pricing in real world settings. For example, the Dutch retailer Albert Heijn last year launched a ‘true pricing’ trial in three of its To Go supermarkets. The three stores offered a range of products to shoppers priced at the ‘normal price’ and the ‘true price’. Albert Heijn worked with the Dutch non-profit True Price to determine the price difference, reflecting factors such as pollution and climate impacts, water use, soil protection, working conditions and discrimination.
A broader initiative was launched in late 2023 by the German retailer Penny in all of its 2,150 stores. In the trial, Penny charged higher prices for nine staple food products to highlight the environmental impact of food production.
The products in the trial were mainly dairy or meat items, but included one vegan schnitzel product. Information on the way the products had been ‘re-priced’ was clearly available at point of sale. This gave a product’s normal current selling price, true cost premium, true cost mark-up percentage and the true cost selling price. The organic foods had environmental follow-up costs of an average of €1.15, the conventional ones €1.57 euros on average, and the vegan schnitzel 14 cents. In some instances the true price charged was nearly double that of the normal selling price. For example, a conventional cheese product (330g) increased in price from €2.49 to €4.84.
Powerful tool for change
The Penny trial will have been watched closely by Europe’s organic sector, which sees true cost accounting as a powerful tool for food systems transformation.
When a team of researchers at the University of Augsburg in Germany applied true cost accounting to both organic and conventional3, they found striking differences. Looking at 22 different agricultural products they found that on average, crop production generated externalities of about €0.79 per kg for conventional and about €0.42 for organic products.
The Augsburg team said that while the true price of organic products is not necessarily lower than those of conventional products, there is an alignment of prices of the two production systems when the polluter pays principle is applied which significantly corrects current market distortions.
These, and other studies, show the scale of the opportunity for organic when it is allowed to compete fairly with other systems.
Transforming food systems
While the main thrust of true cost accounting to date has a been to reflect unaccounted for environmental costs in food production, a worsening global health crisis provides compelling reasons to incorporate human health consequences (including health care costs, societal impacts and lost productivity) into the equation.
True cost accounting is already being used successfully to tackle country-specific challenges. Adopted globally it could transform our food systems by advantaging organic and agroecological approaches that bring positive impacts to the environment, while also helping to cut our dangerous addiction to obesogenic ultra-processed foods. It also demonstrates the point once made by the chef and food campaigner, Jamie Oliver, that “the price of organic is the right price”.
- The State of Food and Agriculture 2023. Food and Agriculture Organization of the United Nations
2.The development of a method for the global health community to assess the proportion of food and beverage companies’ sales that are derived from unhealthy foods. Globalization and Health (Springer)
3. True cost accounting of organic and conventional food production. 2023. Journal of Cleaner Production
This article was commissioned by, and appeared first in, Bio Eco Actual
