Market Trends & Economy Policy & Regulation Sustainable Agriculture

FAO Reports Agrifood’ Hidden Costs To Be At Least $10T Annually

The FAO reports that agrifood systems' hidden costs are $10 trillion yearly, pressing for true cost accounting for sustainability.
Key Takeaways
  • Massive Hidden Costs: Agrifood systems are incurring hidden costs of at least $10 trillion annually—almost 10 percent of global GDP—impacting health, the environment, and society.
  • Diet-Related Health Impacts: Over 70 percent of these hidden costs stem from unhealthy diets high in ultra-processed foods, fats, and sugars, leading to significant losses in labor productivity.
  • Environmental Toll: One-fifth of the hidden costs are related to environmental damage, such as emissions, land-use change, and water use, with the actual scale likely underestimated.
  • Disproportionate Impact on Low-Income Countries: Low-income countries bear the brunt, with hidden costs accounting for over a quarter of their GDP, whereas it’s less for middle- and high-income countries.
  • Call for True Cost Accounting: The FAO report advocates for regular, detailed, accurate cost accounting to identify and mitigate these hidden costs, urging action from governments and the private sector.

The Food and Agriculture Organization of the United Nations (FAO) has released a pivotal analysis highlighting the staggering hidden costs embedded within our global agrifood systems. According to their latest research, covered in the 2023 edition of The State of Food and Agriculture (SOFA), these costs amount to at least $10 trillion annually. To put this into perspective, this figure approaches 10 percent of the worldwide Gross Domestic Product (GDP), exposing a substantial financial burden that has been largely overlooked.

This revelation unfolds over the examination of 154 countries, shedding light on the profound consequences of our current agrifood practices. The SOFA report dissects the contributors to these costs and outlines the steps needed to address this urgent issue.

Most hidden costs—more than 70 percent—are linked to diet-related health concerns. High consumption of ultra-processed foods, excessive fats, and sugars has led to widespread obesity and non-communicable diseases. The ramifications are far-reaching, with labor productivity losses soaring, especially in high- and upper-middle-income countries.

Environmental consequences account for a fifth of these costs. Our agrifood systems significantly contribute to greenhouse gas emissions, nitrogen pollution, drastic land-use changes, and excessive water use. Despite the best efforts to quantify these impacts, the full extent is likely underreported due to data limitations.

Low-income nations are disproportionately affected. For these countries, the hidden costs represent more than a quarter of their GDP, starkly contrasting to the less than 12 percent in middle-income countries and under 8 percent in high-income economies. In regions already struggling with poverty and undernutrition, these hidden costs exacerbate the challenges faced by vulnerable populations.

The FAO’s report is a clarion call for a concerted effort toward accurate cost accounting—an analytical approach that encompasses the comprehensive economic, environmental, and social costs of agrifood systems. The goal is to provide a more transparent and consistent basis for decision-making by governments and the private sector. This could pave the way for informed actions that address the broader impacts of food production and consumption.

With a historic step, FAO dedicates two consecutive SOFA editions to this theme. The current report lays the groundwork with initial estimates, and the subsequent edition will delve into targeted assessments to uncover the most effective mitigation strategies. The report signals a variety of policy levers—taxes, subsidies, legislation, and regulation—that governments can adjust to transform agrifood systems for the better.

FAO Director-General QU Dongyu emphasizes the critical juncture at which our agrifood systems stand. Amidst a confluence of global challenges—food security, climate crisis, biodiversity loss, and socioeconomic turbulence—the Director-General highlights the imperative of acknowledging and addressing these hidden costs. His message is one of collective responsibility and action, a unified drive to reform our agrifood systems for the shared benefit of humanity.

The FAO’s analysis is not just an eye-opener—it is a roadmap for change. It underscores the necessity for innovation, investment in data collection, and capacity building to implement accurate cost accounting effectively. As the report suggests, such steps are crucial to transforming agrifood systems, tackling the climate crisis, alleviating poverty, bridging inequality gaps, and achieving food security.

Photo by Elaine Casap on Unsplash

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