The hidden cost of cheap food is finally being exposed, helping organic to compete more fairly. 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 hidden cost of «cheap food» is a dark secret that the industrial food industry would really like to keep that way.
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. Explaining why organic food costs more and making the case for higher food prices more generally during a cost of living crisis is even harder.
Nevertheless, in the last few years there has been a concerted effort from a broad range of actors – from organic groups, to environment campaigners; consumer bodies to academics – 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. These costs are not paid for by food and farming businesses, the SFT says, “they’re passed on to the public though taxation, lost income due to ill health, and the price of mitigating and adapting to climate change and environmental degradation”.
Globally, the hidden social, environmental and health costs of agrifood systems could total as much was $12 trillion, according to 2020 research for the United Nations Food and Agriculture Organisation (FAO). And while the majority of these hidden cost are generated in high income countries, their greatest economic burden falls on low-income countries, where they can reach nearly a quarter of GDP1.
True cost accounting is a powerful tool for food systems transformation
True cost
To assess both the negative and positive impacts of different types of food and farming systems, researchers talk about external costs, or 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 some 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, all on university campuses, offered a range of products to shoppers priced at the ‘normal price’ and the ‘true price’. Albert Heijn worked with the Dutch environmental and social justice movement True Price to determine the price difference, reflecting factors such as pollution and climate impacts, water use, soil protection, working conditions and discrimination. To give an example of how this worked in store, black coffee in Albert Heijn’s cafés would usually be €2.00. The true price was set at €2.08 for espresso, while for latte it was €0.36. For the same coffee with oat milk instead of cow’s milk, the actual price was €0.11 higher.
A broader and higher profile initiative was launched in late 2023 by the German retailer Penny, which it operated in all of its 2,150 stores. In the trial, Penny charged higher prices for nine staple food products for one week to highlight the environmental impact of food production.
The retailer collaborated on the initiative with the Technical University of Nuremberg and the University of Greifswald. In the Penny trial the environmental impacts of conventional food products were directly compared with organic equivalents.
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 conventional and adjusted prices accordingly2, they found striking differences. Looking at 22 different German 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 difference is much smaller when dairy and meat products are compared, reflecting the heavy environmental impact of livestock farming across all systems.
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.
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.
Transforming food systems
As we learn more about the damaging health impacts of consuming a diet high in ultra-processed foods (described by the British doctor Chris Van Tullekin as “inherently violent to our bodies”), the aim of the industrial food industry becomes ever clearer – to find better ways of extracting money from citizens, at whatever cost to health.
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 that the point 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
- True cost accounting of organic and conventional food production. 2023. Journal of Cleaner Production
Author: Jim Manson, Journalist
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