Counting the hidden $12-trillion cost of a broken food system

The world’s food system costs trillions in poor health and ecological damage. On World Food Day, governments and researchers must commit to more-regular audits of these unseen expenses.

One-third of food does not need to be wasted.Credit: Alistair Scott/Alamy

There’s an unfolding tragedy at the heart of the world’s food system and its cause lies mainly at the door of governments, food manufacturers and agribusinesses.

The situation is urgent. One-third of all food goes to waste, and yet governments and other players in the food system are unable to prevent 820 million people from regularly going hungry. The food industry, especially, bears responsibility for the fact that 680 million people are obese, but it is largely governments and their citizens who have to pick up the costs of treatment.

When industrial-scale farms draw copious quantities of water to irrigate crops, again it is taxpayers who foot the bill for the water scarcity that can follow. It’s the same for agrochemicals and their effects on the health of people and ecosystems. Governments find themselves shouldering the costs of biodiversity loss, and mopping up agriculture’s contribution to greenhouse-gas emissions.

These hidden costs — or externalities — must be met, and last month a landmark report estimated them to be somewhere in the region of US$12 trillion a year, rising to $16 trillion by 2050. That is a staggering figure — equivalent to the gross domestic product of China.

What is equally alarming is that these costs are not being regularly counted, and the food and agriculture industries seem to assume that the bill will be paid. That isn’t right and has to change.

The report, which is the work of an organization called the Food and Land Use Coalition — which includes business groups and research institutions as well as the United Nations — also calculated the costs that governments and businesses would need to pay to transition to a more sustainable food system. That estimate comes to somewhere between $300 billion and $350 billion annually. In addition — and after taking account of hidden costs — a more sustainable food system could yield a further $5.7 trillion a year by 2030 in new economic opportunities, offsetting the $350-billion price tag by many multiples.

For example, a transition to plant-based diets containing less salt, sugar and processed foods is estimated to cost $30 billion. But the resulting economic benefits are predicted to be around $1.28 trillion. Cutting food waste is similarly estimated to cost $30 billion, with an estimated $455 billion expected to flow in commercial opportunities from waste reduction.

So if there’s money to be made, it is reasonable to ask what is holding companies back. Why aren’t they queueing up for a slice of the pie? Some undoubtedly are, but more could be persuaded, or compelled, to act.

Governments have several levers when it comes to getting companies to change behaviour. One is taxation, a function of which is to fund public services, including clean-up efforts. Another lever is regulation — although in recent years, the fashion among some governments, in developed countries at least, has been to avoid imposing strong regulations. Instead, there is a move towards using softer methods to change practices in industry, drawing on the work of researchers in the behavioural sciences, for example.

A third lever is financial incentives — such as promoting the idea that companies can make profits from sustainability. Such an approach has had a measure of success following the influential 2006 publication of  The Economics of Climate Change: The Stern Review , from development economist Nicholas Stern of the London School of Economics and Political Science. Among other things, this report and others that followed paved the way for several climate-change funding initiatives.

Whichever lever is used — and the most effective route is likely to involve a combination of all three, and more — there must be more-regular accounting and publishing of these hidden costs. That could be a task for national ministries of finance, or national statistics offices, working closely with researchers.

The Food and Land Use Coalition has performed an important service, but its calculations cannot be a one-off exercise, and governments, in turn, need to use these data to compel industry to act.

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