True Cost Accounting Resources

Reprinted from a June 18, 2018 blog posted by Anne Schwartz.

Anne Schwartz is a long-time CSANR Advisory Committee member, former Tilth Producers of Washington president, proprietor of Blue Heron Farm, and lifelong advocate for sustainable agriculture.  Anne is a guest blogger, challenging College of Agricultural, Human, and Natural Resources Sciences faculty, and CSANR faculty in particular, to focus on and address the challenges of True Cost Accounting.

Anne Schwartz holding bunches of radishes
Anne Schwartz

True Cost Accounting is the study in economics that addresses all of the upstream and downstream costs and benefits associated with a set of management decisions and ensuing practices, and their long-term impacts on natural resources and communities.  Other terms used to indicate a similar approach include: Full Cost Accounting (FCA), Life Cycle Analysis (LCA), Triple Bottom Line (TBL), Natural Capital Accounting (NCA), and Cradle to Cradle (C2C).

The intent of this letter and accompanying publications and links is to provide a wide-ranging list of resources that will encourage and facilitate the incorporation of True Cost Accounting (TCA) into WSU research and teaching programs.  It aims to reach multiple audiences; university/college administrators, department chairs, faculty and students as well as outside stakeholders including businesses.

Three of the five WSU Grand Challenges (developed in 2016 to help guide University focus and development) would be directly benefited and enhanced by the incorporation of TCA principals into the research and teaching programs at WSU: GC1 – Sustaining Health: The Uncompromising Pursuit of Healthier People and Communities; GC2 – Sustainable Resources for Society: Food, Energy, and Water; and GC3 –  Advancing an Educated, Informed, and Equitable Society.

For too long, industrial progress has proceeded with little concern for, or recognition of, the full costs its technologies and management decisions impose on humans and the environment, labeling these costs as “externalities”. Cost Benefit Accounting (CBA) -based economic principles have left these externalities unmeasured and therefore unmanaged.  Being economically invisible, they have been unaccounted for in public and private decision-making.  Thus, our market systems have largely failed to develop mechanisms to prevent, repair or mitigate those costs, which are then shifted to the environment (by way of degradation) and to society and individuals (by way of negative health impacts, increased taxes and costs of doing business).

The perverse incentives (with their negative, unintended consequences) intrinsic to market-driven CBA have resulted in a failure to adequately provide for sustainable resource use, create incentives for healthful diets and food systems, and ensure regional food security. In the face of global disruptions from climate change, now more than ever we need a new approach to guide research and technology development and implementation.  Including True Cost Accounting in our considerations will lead to better policy and resource use decisions and investments for Washington State, both in the public and private sectors.

I challenge administrators, faculty, non-profits, and members of the private sector to dig into the resources below as examples of the headway being made by others.  Use this as your jumping off point; your inspiration.

These publications explore economic externalities and develop value-based parameters that help integrate them with research, teaching and policy development.

Iowa State University

Dr. Michael Duffy, Iowa State University, (Emeritus) Ag Econ faculty, is the author of numerous papers that explore externalities in agricultural production systems, farm viability, IPM implementation, soil conservation and farm valuation.

External Costs of Agricultural Production in the United States, Tegtmeier, Erin M. and Michael D. Duffy. International Journal of Agricultural Sustainability, Vol. 2, No. 1, Channel View Publications, Clevedon, UK, 2004.

This paper lays an early foundation for examining how current accounting systems fail to accurately reflect the long term and full costs of current agriculture production practices.  The parameters included in this discussion include: human health, natural resources, and wildlife and ecosystem biodiversity.  Their methodology makes use of consumer price indexes because many external costs are borne across a wider population than just the producers, and over a much longer time frame than the year of use of any particular production practice.  They identify damage categories: human health, air, soil and water, and gather data from existing reports that have examined specific issues related to human health and environmental damage resulting from modern agriculture practices.  They include budget data from US government agencies that identify, regulate and mitigate these damages and include: USDA Food Safety, AMS, ARS and APHIS, National and State EPA’s, and the FDA.  They also include actual cost data generated from these identified negative impacts.  They acknowledge this report is not comprehensive and recommend that public policy should promote sustainable practices as a way to internalize some of the negative costs of production systems.

Value of Soil Erosion to the Land Owner, Michael D. Duffy, Iowa State University, Ag Decision Maker. 2012

In this paper, Dr. Duffy identifies and places values on the costs associated with soil loss.  Starting at the farm, and following the impacts to current and future production, he includes fertilizer and soil carbon loss, and increased need for fertilizer in future crops.  The paper also explores down-stream costs to society where costs are born by local municipalities, as well as ecosystem impacts downstream to fish and aquatic health from water turbidity and fertilizer load.  Finally, he places values on the decreased soil productivity related to soil erosion valued in terms of rent paid or declining value to the next owner.

An Economic Comparison of Organic and Conventional Grain Crops in a Long-Term Agroecological Research (LTAR) Site in Iowa. Delate, K., M. Duffy, C. Chase, A. Holste, H. Friedrich and N. Wantate.  Journal of Alternative Agriculture, Vol. 18, No. 2, 2003.

This paper compares organic and conventional systems on a typical Iowa farm and shows that with training and access to organic systems management strategies, yield and profitability between organic and conventional systems are comparable.  Adopting more organic practices has demonstrated the potential to reduce negative externalities to human health and the environment.

The Clock is Ticking for Rural America in Sustainable Land Management; Strategies to Cope with the Marginalisation of Agriculture, Duffy, Michael. ed F. Brouwer, et al, Edward Elgar Pub. Ltm., The Lypiatts, 15 Lansdown Rd., Cheltenham, UK, 2008.

This peer reviewed paper appears as Chapter 4 in the book Sustainable Land Management: Strategies to Cope.   It provides insights into the changing nature of rural communities as farms get larger and there are fewer farmers.  He examines the structure of ownership and production systems, and the impact from USDA policy and commodity price supports.   Those communities with access to recreational opportunities and urban populations are developing strategies to slow the marginalization of farming communities.

University of Warwick, UK

A comprehensive review of full cost accounting methods and their applicability to the automotive industry

Published in the Journal of Cleaner Production in 2016, this paper measures a broad range of economic, environmental, resource and social impacts, data which are not currently available for the automotive sector.

Multi Institutional Collaboration

Full cost accounting for the life cycle of coal – Coal Train Facts

Published in the Annals of the New York Academy of Science, issue; “Ecological Economics Reviews”.  This 32-page study was prepared by faculty from Harvard, Pennsylvania, West Virginia, and WSU-Spokane, and evaluates each phase of the waste streams generated by the use of coal; from the extraction, processing, transportation and combustion of coal.  The focus is on the Appalachian region of the US, but the data and valuations are not unique.

Some WSU Extension websites provide links to external sites for the convenience of users.  These external sites are not managed by WSU Extension.  Furthermore, WSU Extension does not review, control or take responsibility for the content of these sites, nor do these sites implicitly or explicitly represent official positions and policies of WSU Extension.

Several universities are offering courses that teach principles of resource valuation and integration with capital. This section deserves further exploration and populating.  Universities all need to offer course work that prepares future generations with the tools to address all aspects of sustainable resource use, including working to more fairly distribute wealth.

George Washington University Washington Dc

GWU has established Sustainability as a University core value and provides several undergraduate and graduate programs with a focus on preparing students to explore broad ideas around sustainability in our global culture.  GWU offers 470 multi-disciplinary courses related to Sustainability across many colleges and departments, an undergraduate minor from any college, a graduate degree in Sustainability, and Executive Study Certificates for career professionals. 

GWU offers a Minor in Sustainability via a series of courses that provide an in-depth evaluation around 3 topics: Sustainable Cities; Climate Change and Policy; and, Our Sustainable Plate.  This minor is built upon the student’s chosen major and introduces critical linkages as society faces the broader implications of resource use in a time of global change.

GWU offers 470 specific courses that address sustainability issues and topics in all of the colleges, and undergraduate and graduate programs.  Included are international issues, the practice of law, corporate management, federal policy, community development, architecture and community planning, biology, urban planning and more.  GWU is one of the leaders in offering broad learning and teaching opportunities for students and faculty alike.

University Of Montana

Sustainable UM, The sustainability program at University of Montana

This program provides faculty and students an opportunity to broaden their programs to prepare students to integrate new ideas into existing course work and program focus. They have incorporated multiple aspects of sustainability throughout the course curriculum across the university.  There is a Green Thread track that guides students in developing a curriculum that best matches their interest and goals. True Cost Accounting appears in a variety of courses.

Yale University

Yale University’s School of Forestry and Environmental Studies has instituted innovative programs with university faculty, industry, communities, government and NGO’s to stimulate research and teaching that will foster secure and wise resource use.

The Governance, Environment and Markets (GEM) Initiative

GEM’s mission is to develop strategies that address critical resource degradation and global problem solving across the research, government, business and community sectors to ensure sustainable resource use into the future.  Their program defines four areas of focus:

·         Market Driven Environmental Governance

·         The Triggers of Durable Policy Change

·         Complex Global Governance Arrangements and Domestic Politics

·         Determinants of Effective Policy Learning

This program involves multi-disciplinary teams and global participation and is intended to be a catalyst for systemic change.

Applied Math for Environmental Studies (AMES): Foundations for Measuring and Modeling Environmental and Socio-environmental Systems

This course introduces a wide selection of math and statistics commonly used in environmental reports and familiarizes students with the integration of data in resource and environmental studies.

Seminar on Environmental and Natural Resource Economics

A seminar that explores original work in the field of environmental and natural resource economics and policy with invited guests and graduate and doctoral students.

Johns Hopkins University

The Center for a Livable Future (CLF)

Among their many exciting new projects, CLF has developed a free, 17 session curricula for teaching high school students about our food system and how to make informed decisions about the food they eat. Food Span Learning

The Ohio State University

The Center for Resilience at Ohio State University

The Center is part of the Sustainable and Resilient Economy program.  They target improving efficiencies in natural resource use, and identifying barriers to implementing sustainable business practices.

Some WSU Extension websites provide links to external sites for the convenience of users.  These external sites are not managed by WSU Extension.  Furthermore, WSU Extension does not review, control or take responsibility for the content of these sites, nor do these sites implicitly or explicitly represent official positions and policies of WSU Extension.

Major credit and appreciation is given to Patrick Holden of the Sustainable Food Trust, based in the United Kingdom, and to Danielle Nierenburg of Food Tank, based in Washington DC.  They have initiated several conferences and meetings to share information and to increase opportunities to collaborate on and further this work.  I urge interested students and teachers to investigate these websites in depth and be inspired to further this exploration.

The Sustainable Food Trust

The SFT, led by Patrick Holden, has promoted this conversation in Britain and with many partners around the world, and provided the inspiration to launch this project webpage on the CSANR website. Their website provides many resources that will familiarize faculty and students with the global attention this topic has attracted.  This organization has been developing reports, organizing conferences and bringing scientists, agriculture businesses, and NGOs together to address the challenges we face with providing food around the planet.  The SFT offers a broad selection of podcasts and films from several True Cost of Food conferences held in Great Britain and the US. They host and share:  research reports and publications; sustainability metrics; and, conferences to bring experts and leaders together to discuss True Cost Food Systems.

The Hidden Cost of UK Food, Nov.2017 Full report-86 pg., exec summary; 20 pg

The True Cost of American Food Conference, April 2016, San Francisco.

This webpage features videos of every plenary and parallel sessions at this conference.  All presenters are identified and there is a 217-page report of the entire conference, which includes links to critical work going on around the world. The list of topics in development could provide hundreds of graduate research projects!

Food Tank

Food Tank, directed by Daniell Nierenberg and based in Washington DC, is dedicated to exploring our food and agriculture systems.  They publish academic reports, organize conferences and interviews, and collaborate with many businesses, foundations and NGOs working on these issues.  They will host a Food Tank Summit in Seattle on March 17, 2018 to explore policy ideas to guide the development of sustainable food systems.  Following is a sampling of their published reports.

The Real Cost of Food:  Examining the social, environment and health impacts of producing food

The True Cost of Cheap Coffee

This study is an assessment of the hidden environmental and societal costs of producing Brazilian coffee.  It follows all the identified impacts, including loss of rainforest, bio-diversity, and the social costs of large scale monocropping in fragile soils.  They have done similar studies to identify hidden costs in cocoa, banana, and shrimp farming.

Global profits don’t begin to cover environmental externalities

This analysis is based on several different reports that address hidden costs of production, ongoing work in the field, and reasons to support local/regional food systems.

Accounting for the Hidden Costs of Monoculture Crops

This report attempts to capture and monetize soil loss and degradation, fertilizer, and costs to society from the transformation and industrialization of mono cropping systems.

16 Campaigns that Reveal the REAL Cost of Food.

This report features 16 organizations and campaigns that are working to monetize external costs of food production.

True Cost Accounting: Deflation Dragging Down Global Food Prices.

Though it seems counter-intuitive that decreasing global food prices could negatively affect low income populations, when global prices for major food commodities are depressed, farmers dependent on producing those crops actually suffer from lower prices paid for their crops, and the cycle increases food insecurity by lowering profit margins.  It points to the importance of understanding production and hidden cost issues in our global food system.

The Economics of Ecosystems and Biodiversity (TEEB)

The mission of this collaborative (based in Geneva, Switzerland and hosted by the United Nations Environment Program), is to identify accounting systems and economic tools that adequately value natural capital and ecosystem and biodiversity services that contribute to food production worldwide.  Their work provides a basis for policy decisions going forward and serves as a foundation for many new programs around the world.

Editor’s note:The leadership mission and scope of work of The TEEB collaboration are among the most advanced and thorough investigation efforts in operation today.

TEEBAgriFood Interim Report – The 132 pg Interim Report introduces the key questions, issues and arguments necessary to evaluate how economics affects agriculture production, food availability and human health impacts from diet.  Interim results are presented from five sector studies (on livestock, rice, agroforestry, inland fisheries and palm oil). The report includes an in-depth study of economic and policy drivers that influence the research, investment and implementation of production systems worldwide.

Biome Studies These studies focus on Ocean Health and Coastal Biodiversity, Water and Wetlands Systems, and Arctic Ecosystems to capture economic and environmental benefits offered by these unique ecosystems. The goal is to increase awareness and consideration of protecting these ecosystems via national policy and cultural awareness.

Foundation Earth: Policy Recommendations to the World Bank

Biosphere Smart Agriculture in a True Cost Economy, 2015 Randy Hayes and Dan Imhoff.

This 32 page report identifies a number of analyses and assessments of prior investments made by the World Bank and other similar institutions to address famine and poverty around the globe.  The report focus is to change historic norms that guide funding and development decisions.   Their findings describe the urgent need for multilateral development banks to identify and value ecological impacts and social displacement in the development and funding of programs.

Schumacher Center For New Economics

Based in Western Massachusetts, this center was formed to continue the work and legacy of E.F. Schumacher (author of Small is Beautiful and Economics as if People Mattered) and other leaders who envisioned healthy communities, protected natural resources and broad opportunities for local businesses to thrive.  They offer lectures, courses, seminars and a library with an extensive collection of books that investigate solutions.

Earth Economics

This Tacoma, WA based organization has published a broad series of reports that capture and value eco-system services around the US.  Their focus issues include: water (free flowing and mountain snowpack), fisheries, working lands in agriculture and forestry, and healthy communities.  Online Access

Wealth Accounting and the Valuation of Ecosystem Services (WAVE)

This organization works to foster sustainable development with international partners through the United Nations, business and academics.  Their programs translate Natural Capital Accounting principles into business planning that features sustainability, and seek to implement Green Accounting into accepted business planning and evaluations.

The Natural Capital Coalition

This global multi-stakeholder collaboration brings together business leaders, scientists and organizations to develop new approaches that value Natural Capital, the wide range of benefits that we derive from nature.  They have developed The Natural Capital Protocol.   Business leaders recognize that their long-term sustainability depends on the long-term supply of those natural resources.  There is also increasing demand on the part of investors to ensure that their investments address climate change and declining natural resources and help to drive substantial changes to business models.

The New Economics Foundation

This British NGO works on a broad spectrum of issues to envision successful and sustainable communities and natural resource use. One of its’ papers, Urgent Recall, Our Food System Under Review  inquires into what makes a food system successful. They argue that current measuring criteria are inadequate to ensure successful food production systems in the future. They identified 8 critical criteria:

  1. have a neutral or positive environmental impact;
  2. be productive in its use of energy and other inputs;
  3. be diverse in species and genes;
  4. support good jobs;
  5. be dominated by short and simple supply chains;
  6. be composed of assets that are controlled by a wide and inclusive set of stakeholders;
  7. foster a positive and thriving food culture and the highest levels of public health;
  8. make food affordable to everyone.

The Lexicon of Sustainability

The Lexicon is a non-profit organization that uses a multi-stakeholder storytelling approach that blends data and insights from university scientists, lawyers with policymaking expertise, government agencies, businesses, television networks, publishers and foundations from around the world.  They deliver stories that provide a roadmap for how to shift our communities towards a more regenerative and responsible food production model, one that improves our health while safeguarding our land, water and air for generations to come.

True Price Organization

This Dutch social enterprise works with governments, multinational corporations, NGOs and others to make sustainable decisions about the way they do business.  True Price quantifies and valuates the economic, environmental and social impacts of groups through metrics such as biodiversity loss, pollution, water use, child labor, health risks.

Global Alliance on the Future of Food

This is a coalition of philanthropic organizations working to ensure sustainable food and agriculture systems. They support international collaborations that focus on six priority areas: TEEBAgriFood, Livestock Systems, Seeds, Health Externalities, Beacons of Hope, and Climate Change.  They have three working groups that plan and execute meetings, conferences and study groups:  Externalities; Advanced Well-Being; and, Agroecology. The goals of the Externalities Working Group, are to articulate the full costs of producing food by developing methods to identify, measure and value the positive and negative environmental, social and health externalities of food and agricultural systems.  Their mission is to develop and implement new policy tools to guide and make use of the market to create and support sustainable food systems.

Some WSU Extension websites provide links to external sites for the convenience of users.  These external sites are not managed by WSU Extension.  Furthermore, WSU Extension does not review, control or take responsibility for the content of these sites, nor do these sites implicitly or explicitly represent official positions and policies of WSU Extension.

The Natural Capital Project (NatCap)

Formed as a partnership between Stanford University, the University of Minnesota, The Nature Conservancy and the World Wildlife Fund, this project seeks to protect the well-being of nature and people with investments that protect earth’s natural resources by applying the science of natural capital to inform decision making.

United Nations World Food Programme (WFP)

Counting the Beans

This project has developed a new tool to highlight the true cost of food to buyers by comparing the ability to purchase typical foods consumed by different cultures and populations around the world.  The tool presents price and affordability as very different measures, and gives relief and humanitarian organizations new ways to measure and evaluate data.

Study.com

This online academy offers an Environmental Study Guide of 19 Chapters addressing many aspects of how we interact with the environment.  The course includes a chapter on full cost accounting that addresses the economic, environmental, health and social costs of an activity.

Some WSU Extension websites provide links to external sites for the convenience of users.  These external sites are not managed by WSU Extension.  Furthermore, WSU Extension does not review, control or take responsibility for the content of these sites, nor do these sites implicitly or explicitly represent official positions and policies of WSU Extension.

Leaders for Nature

An expanding network of sustainability-minded businesses in India looking to focus development in sustainable resource use.

The B Team

Inspired by Lester Brown and the increasing interest in B (Benefits) Corporations.  Legal in much of the US and growing around the globe, B Corporations hold a mission to maximize community and environmental benefits while minimizing the negative impacts.  The B Team formed in 2013 to bring civil society groups and business leaders together to create structures that foster sustainable business development and place earth and people along-side profits as primary business motivators.

Natural Value Initiative

Their work is focused on defining and creating valuations for natural capital and incorporating these new parameters into business planning and development.

TruCost

Based in London, this organization does environmental consulting and provides data to businesses, investors, researchers and policy makers who wish to understand and reduce the environmental costs of business decisions.  They have become a leading source for data that measures the cost of environmental damage and resource depletion by companies around the globe. They help to integrate this knowledge into both global relief work and sustainable business opportunities and have taken a leading role in helping businesses develop Sustainability Reporting Frameworks, including: the Global Reporting Initiative (GRI) standards;  the Sustainability Accounting Standards Board (SASB) standard; and, Integrated Reporting (IR).

In Oct 2015, they published Natural Capital Impacts on Agriculture; Supporting better decision making.  This is an evaluation of all the environmental costs and impacts for crops and feed production, starting at the farmgate and tracing back through the upstream flow of inputs.

In October 2016, controlling interest in TruCost was purchased by the S&P Dow Jones Indices to better inform investment decisions going forward.

Science Direct

A comprehensive review of full cost accounting methods and their applicability to the automotive industry. This report proposed a Sustainability Assessment Model (SAM) for the automobile industry to address mitigation issues around their impact on society and the environment.

The Future of Food

A film by Deborah Koons Garcia, “The Future of Food” examines the complex technology and consumer issues surrounding major changes in the food system today — genetically engineered foods, patenting, and the corporatization of food — in terms the average person can understand. It discusses part of the complexity facing our food choices in the marketplace today.

Some WSU Extension websites provide links to external sites for the convenience of users.  These external sites are not managed by WSU Extension.  Furthermore, WSU Extension does not review, control or take responsibility for the content of these sites, nor do these sites implicitly or explicitly represent official positions and policies of WSU Extension.