Our food and agriculture is responsible for trillions of dollars of hidden costs, says the UN. Here’s why – and what can be done

Food not only nourishes us, but shapes the cultures of our countries. The agriculture industry that grows, processes and distributes food also supports jobs and livelihoods for more than a billion people.

But there are hidden environmental, social and health costs caused by the negative impacts of food and farming.

In its report, The State of Food and Agriculture 2023, the United Nations’ Food and Agriculture Organization (FAO) unpacks these ‘true costs’ of our agrifood systems and explores their impact.

The report finds that the hidden costs of food and agriculture (agrifood) systems exceed $10 trillion, and could be as much as $12 trillion – nearly 10% of global gross domestic product – even with uncertainty taken into account.

This shows the “urgent need” to factor these hidden costs into decision-making around transforming agrifood systems, the FAO says.

The organization defines agrifood systems as covering the journey of food from farm to table, including food growing, processing, transportation, buying, eating and disposal.

The State of Food and Agriculture 2023 is the FAO’s first attempt to assess the hidden costs of agrifood systems at a national level across 154 countries.

The hidden environmental costs of food and agriculture add up to $2.9 trillion, the FAO estimates.

More than half of this relates to nitrogen emissions – from fertilizer and manure used on land entering surface water and the air. Greenhouse gas emissions that contribute to the climate crisis account for another 30% of hidden environmental costs from food and agriculture.

Land use change – clearing a forest to create farming land, for example – and water use account for another 14% and 4% of hidden environmental costs respectively.

The hidden social costs not factored into the price of food are linked to poverty and undernourishment.

This includes poverty among people working in food and agriculture and lost productivity when people are unable to work at their full capacity because they are undernourished.

In low-income countries, these social costs account for half of all the hidden food and agriculture costs the FAO measured.

The impact is less in lower-middle-income countries – at 12% of hidden costs – and smallest in upper-middle- and high-income countries.

Globally, these social costs add up to $500 billion, or 4% of hidden food and agriculture costs.

The biggest hidden costs not reflected in the price of food are health-related and are fuelled by unhealthy diets that are high in fats, sugars and ultra-processed foods, the FAO says.

These unhealthy diets lead to obesity, non-communicable diseases, and more low productivity in the workplace, with negative impacts on the economy as a result.

Hidden health costs total $9 trillion – more than 70% of the hidden costs the FAO measured.

Government policy changes can mitigate hidden agrifood costs through taxation, subsidies and legislation. This might include regulating the way businesses produce, process and promote their products.

The FAO’s true cost accounting approach – which values the industry’s environmental, social, health and economic costs and benefits – can also be used by businesses to rethink their own strategy and operations. This could involve changing planning timescales from “short-term profit maximization to long-term sustainability strategies,” the FAO says.

A scenario modelled in Indonesia showed more sustainable practices would allow farmers to increase their incomes and improve crop productivity while reducing environmental impact.

The Food Action Alliance, hosted by the World Economic Forum, is bringing forward the best of multi-stakeholder partnerships and collective action to accelerate transitions in the way food is produced, processed, consumed, and disposed of to best achieve the Sustainable Development Goals (SDGs) and targets of the Paris Agreement on climate.

“The shared vision of all Food Action Alliance partners is to achieve sustainable food systems that deliver better, faster, and at scale on food security and nutrition, inclusive growth and decent jobs, environmental sustainability and climate resilience,” says Tania Strauss, Head of Food and Water at the Forum.

Alliance hubs in Africa, Latin America, India and South-East Asia are working on initiatives including transforming the dairy industry in East Africa, rolling out regenerative agriculture models and reducing food waste on farms in Colombia.

In South-East Asia, another initiative is focused on increasing access to digital technologies to boost harvests.