This latest analysis conducted on behalf of the Food and Agriculture Organization of the UN (FAO) spans 154 countries and shines a light on global agri-food systems. 

Speaking to Food Ingredients First, Andrea Cattaneo, senior economist and editor of the SOFA report, says the “staggering US$10 trillion or more in hidden costs that our agri-food systems produce is driven by unhealthy diets.”

“These diets are typically low in fruits, vegetables, nuts, whole grains, calcium and protective fats and high in sodium, sugar-sweetened beverages, saturated fats and processed meat. As a result, these diets lead to obesity and non-communicable diseases, which, in turn, cause labor productivity losses.”

These costs increase with income and are therefore largest in high- and upper-middle-income countries, although lower-middle-income countries are also “greatly affected,” he explains. “In contrast, addressing poverty and undernourishment remains a priority in low-income countries.”

According to Cattaneo, labeling and certification have “a vital role” in this regard. 

“Front-of-pack labels and/or certifications that refer to standards, for example, highlighting sustainability and/or health implications, can influence consumers’ purchasing behavior.” 

“However, the effectiveness of voluntary standard certifications is mixed and depends on their implementation as well as the capacity to enforce compliance with sustainability requirements.”In low-income countries, hidden costs associated with poverty and undernourishment are the most significant.

Policies to induce transformation 
While it is understandable that the private sector aims to maximize returns and may not adopt voluntary sustainability standards, getting public policies right is essential to address hidden public costs, claims Cattaneo.

“An example of how policies can induce transformation in the right direction is to mandate the private sector to provide accurate and reliable information for consumers to make healthy and sustainable food choices. So, the private sector has an important role to play by clearly reporting how their activities are impacting the environment, health and society,” he says.

Increasing availability & affordability 
Notably, consumers are central to the transition of agri-food systems toward sustainability, especially when diets are primarily influenced by consumer preferences, such as taste, nutritional value and convenience, flags the FAO. 

Indeed, food prices play a fundamental role in driving dietary patterns. “In many countries, fats and sugars currently provide dietary energy at a very low cost, fuelling the obesity epidemic,” adds Cattaneo. 

This issue calls for a repurposing of government support for food and agriculture to increase the availability and affordability of healthy diets. 

Governments and other stakeholders can also try to nudge consumers toward better food choices, such as by making nutritious food options easier to reach and more accessible in school cafeterias and other public food establishments. 

Environmental implications 
One-fifth of the total costs are environment-related, from greenhouse gas and nitrogen emissions, land-use change and water use. This problem affects all countries, and the scale is underestimated due to data limitations.

“More than a fifth of the total hidden costs are still environment-related, and these are probably underestimated because of limitations in the data,” comments Cattaneo. “We also know they affect all countries and are growing.”

FAO director-general, Qu Dongyu, explains: “In the face of escalating global challenges: food availability, food accessibility and food affordability; climate crisis; biodiversity loss; economic slowdowns and downturns; worsening poverty; and other overlapping crises, the future of our agri-food systems hinges on our willingness to appreciate all food producers, big or small, to acknowledge these true costs, and understand how we all contribute to them, and what actions we need to take.”

“I hope this report will serve as a call to action for all partners — from policymakers and private-sector actors to researchers and consumers — and inspire a collective commitment to transform our agri-food systems for the betterment of all.”
True cost accounting allows the estimation of the hidden costs generated by market, institutional and policy failures.

Low- and high-income differences
Low-income countries are proportionately the hardest hit by hidden costs of agri-food systems, which represent more than a quarter of their GDP, as opposed to less than 12% in middle-income countries and less than 8% in high-income countries. 

In low-income countries, hidden costs associated with poverty and undernourishment are the most significant.

Future research 
The report makes a case for more regular and detailed analysis by governments and the private sector of the hidden or “true” costs of agri-food systems via accurate cost accounting, followed by actions to mitigate these harms.

Cattaneo says that the FAO will, indeed, be conducting more research on this topic. 

“The SOFA 2024 will showcase the flexibility in its application to different scopes, from an entire agri-food system down to a single product. Moreover, it will demonstrate the importance and challenges of incorporating the hidden costs into decision-making to evaluate different policy and management options to transform agri-food systems for the better.”

“Its ultimate goal is to prepare decision-makers better for actions to steer agri-food systems toward environmental, social and economic sustainability,” he concludes.