How much do you pay for your morning cup of coffee?
Now let me rephrase the question: how much would you be prepared to pay for your morning cup of coffee if you knew the social and environmental costs of producing it were factored into the price?
We’ll soon get a sense for whether the average shopper is prepared to pay a premium for a guilt-free brew. Dutch retailer Albert Heijn has been working with the NGO, True Price, to explore customers’ response to the concept known as true cost accountancy. Shoppers in three of its stores see two prices when they pay for a cup of coffee: the price they normally pay and the ‘true’ price which is the amount they should pay when the various social and environmental costs such as CO2 emissions, water consumption, use of raw materials and working conditions are priced in rather than externalised as is normally the case.
True cost accountancy is not a new concept, but in an era of cascading environmental risks it’s one that has never felt more relevant. A 2021 report from the scientific group of the UN Food Systems Summit estimated the current externalities associated with the food system at $19.8trn (£15.8trn), double the value of total global food consumption ($9trn, £7.2trn). Of those external costs, $7trn (£5.6trn) were in environmental costs, $11trn (£8.8trn) in costs to human life and $1trn (£0.8trn) in economic costs.
Marketers may preach the gospel about consumers wanting to purchase products with a ‘purpose’ but the reality is there are few financial incentives for businesses to produce food in a more sustainable way. As a 2019 paper from True Cost detailed, emitting greenhouse gases is still more or less free of charge, but future generations will bear the external costs through the effects of climate change.
Obesity is another example of where the market dictates a perverse outcome whereby the profits from selling unhealthy foods – often bulked out with cheap fats, salt and sugar – are captured by private corporations and the costs picked up by the public purse in the form of health service funding.
Yet for all the reams of academic literature written on the subject, true cost accountancy has never really threatened to penetrate the mainstream food market. On the contrary, when we do pay the true price of food and drink it’s invariably in the form of a premium for those products that can leave a more delicate imprint on the planet and/or society – think organic vegetables, for example, or higher welfare meat. Healthy foods are over twice as expensive per calorie as less healthy foods, according to the Food Foundation’s Broken Plate 2023 report.
Will Albert Heijn’s move open the floodgates to more businesses piloting true price approaches? That may be overly optimistic. Incorporating true cost principles across the global food system would need a rewiring of the entire market economy that businesses alone could not deliver. It would require policy makers to step up and create an enabling framework by better quantifying environmental and social costs and then aligning taxation and subsidies with these externalities in a way that ensures all citizens can access a nutritious, sustainable diet. Even if there was the political will, governments would face huge challenges in navigating all kinds of thorny issues involving, for example, international trade law.
That’s not to suggest that initiatives (or stunts if you want to be cynical) like Albert Heijn’s have no value within this broader context. Indeed, it occurs to me that while supermarkets are not going to rush to hike the price of high-margin, ultra-processed products (the type that research increasingly shows have an oversized impact on people and planet) foodservice operators may be in a stronger position to gradually embed the principles of true cost accountancy into their business models.
Consider the example of a contract caterer servicing a workplace contract. Many employers already subsidise the food provided to their staff; what’s to stop them tailoring those subsidies so that healthy, climate-friendly dishes are sold at a discount and those with the greatest externalities are unsubsidised? Or why not link sustainable food choices with employee reward and incentive schemes?
This does not feel like such a leap from the current trend to display eco-labels which give customers a snapshot of a dish’s true impact as a means of nudging them to choose a better option. Why not make that nudge a financial incentive where the commercial context allows it?
It won’t be easy to embed the principles of true cost accountancy into our dysfunctional food system but we should be certain of one thing: if we don’t, then those externalities that are priced out of the current system will continue to bite back at us.