A common destination: On the road towards the true value of food
At the United Nations Food Systems Summit (UN FSS) in 2021 the True Value of Food Initiative was launched – a ‘game changer’ according to Stientje van Veldhoven, Vice President and Regional Director for Europe at the World Resources Institute (WRI). The Initiative is the result of a multi-stakeholder collaboration between the UN FSS Scientific Group, the Global Alliance for Improved Nutrition (GAIN), the Food and Agriculture Organization (FAO), the Global Alliance for the Future of Food (GAFF), the World Benchmark Initiative, Fairtrade International, United Nations Environment Program (UNEP), the World Business Council for Sustainable Development (WBCSD), the Impact Institute and Rabobank. Building on the momentum of this UN FSS, leveraging the World Economic Forum’s Annual Meeting, and recognising that much remains to be learned about the science and practice of the True Value of Food, three of the initiators – the WBCSD, Impact Institute and Rabobank – together with DSM, organised an online session on the future of the True Value of Food.
The session was originally planned as a live event in the context of the World Economic Forum’s Annual meeting in Davos in January. Although the WEF meeting meeting was postponed to early summer 2022 due to COVID-19, the WBCSD, Impact Institute and Rabobank decided to host their event online. Bringing together the perspectives of producers, traders, consumers, banks and corporates, they hope to identify the next steps towards meeting the big tasks that lie ahead and continue the conversation live in Davos later this year. Under the expert leadership of moderator Stientje van Veldhoven, speakers and participants representing the viewpoints of all relevant stakeholders, discuss the challenges and opportunities for the realisation of a True Value of Food framework. The main outcomes of this fruitful and thought-provoking event are collected in this article, which will be used to shape a concrete agenda and action plan for the road ahead.
A simple bar of chocolate
As it is today, our food system is putting enormous pressure on people, societies and our planet. Estimates of the environmental and human health costs of our current food production and consumption are as high as USD 20 trillion. “This adds up to more than twice the value of present-day global food expenditure,” Berry Marttin, Member of the Managing Board of Rabobank, notes. And these estimates do not even include the high social costs, such as child labour and unliveable wages, and other economic costs, such as food waste. Despite the knowledge that the current modus operandi is untenable however, unhealthy and unsustainable food remains cheaper to buy and produce than healthy and sustainable food. “The price we pay as consumers rarely reflects the true costs [of food],” explains Geraldine Matchett, Co-CEO and CFO at DSM and member of the company’s Managing Board, explains. And the same holds true for the benefits of affordable food, Adrian de Groot Ruiz, Executive Director of the Impact Institute and co-founder of True Price, adds. “As profits are based on market prices, the profitability of a business does not reflect the value it creates to society,” he explains. “Clearly, our global food system is broken.”
The defect in our food production and pricing system becomes very tangible when Hajar Yagkoubi, former UN Youth Representative for the Netherlands, shares an all too familiar experience she had in her local supermarket. Trying to choose a chocolate-bar, she wanted to know the true cost and price of all the options before her. “But I was unable to,” Yagkoubi shares, “because food companies currently do not give the information we need.” A simple bar of chocolate has hidden costs that are not accounted for in the price consumers pay in the supermarket. “But if I think about the environmental costs of [a bar of chocolate] they will be paid for eventually, whether we account for them or not. And if it is not through true pricing, then that bill will be paid for in the form of floods, […] draughts and other [detrimental] climate effects.” As moderator Stientje van Veldhoven puts it: “there is no such thing as a free lunch”.
A simple bar of chocolate thus tells the story: if the true costs of food are not accounted for in the prices consumers pay or farmers receive, the bill will have to be paid in another way – by those communities that are already most vulnerable to the effect of climate change, and by the generations to come.
Together on the way forward
Against the backdrop of the current situation in the food market, Berry Marttin poses two key questions that we have to tackle: “How can we make healthy and sustainable food cheaper and affordable for all? And how can we ensure production of healthy and sustainable food is profitable for producers?” Finding answers to these questions is not only terribly urgent; it is also terribly challenging. What is needed, various speakers stress, is a complete rethinking and transforming of the global food system. But where to start? “At present”, De Groot Ruiz points out, “the current food system creates massive hidden costs, outnumbering the global GDP of the food and health sectors combined.” It is within these hidden costs that the beginnings of an answer to Marttin’s questions can be found: We must make visible the true costs and benefits of food and ensure that they are reflected in the price that consumers pay. These costs and benefits – known as externalities – must be “internalised into profits and prices, so they reflect the true value of food to society,” De Groot Ruiz argues. For this, Nestlé Executive Vice President and Head of Operations Magdi Batato points to the importance of cross-sectoral collaboration to realise the True Value of Food system: “All actors in the food system – governments, producers, consumers, the financial sector – need to understand and account for externalities; with the same framing, same information and ultimately same incentives. Thus, they would be driving a system-wide change that enables us all to make the right trade-offs at each step of the way in our transition towards a sustainable and healthy food system.”
The idea that a sustainable, global food transformation demands alignment and concerted effort finds support among many participants and speakers, including Director General of Consumers International Helena Leurent. “The True Value [system] has the potential to unlock food systems transformation on a global scale, but only if it builds from a foundational recognition of the universal right to healthy, affordable food. Value, rather than price, could become the driving force behind international trade regulations, government policies, and responsible business practices, facilitating food systems change without putting an unfair burden on consumers.” However, for this to work, Leurent continues, “[we need] an internationally accepted and independently regulated framework [that] incorporates environmental, social, and economic costs to people and planet”.
“All business shall be healthy and sustainable or there shall be no business. Healthy sustainable foods should become the new normal.”
– Berry Marttin, Member of the Managing Board of Rabobank
Challenges and policy
True Value may be a promising way forward to achieve the envisioned transformation, but the journey must be handled with care as serious obstacles will be met along the way. When considering the implementation of True Value, Helena Leurent stresses it is important to realise that “rising prices will always hit the poorest consumers hardest. With the FAO reporting that some three billion consumers were unable to afford a healthy diet in 2021, we have long since exceeded any margin for error on this front. Price adjustments must be approached with caution, and should be understood as just one element in the toolkit of True Value”
In addition to the potentially negative impacts on poorer consumers, transition costs for farmers must also be taken into account. To make progress on the path laid out before us, inclusion of and collaboration with these farmers is indispensable. “[They] are key to improving the environmental impact of food”, Magdi Batato argues, noting their central role in Nestlé’s recently announced plans to accelerate the transition to a regenerative food system. Similarly, and speaking on behalf of these farmers, president of the World Farmers’ Organisation Theo de Jager, underlines that farmers are not unwilling to embark on the journey towards True Pricing. “But back on the farm not all food is produced in the same way, in the same markets,” he shares. “There is a huge gap between the market that cannot afford nutritious food and the demands of the consumers in the markets of the global north.” It thus follows that a one-size-fits all solution will not work. And yet, at the same time, there is a strong push for alignment and harmonisation of frameworks. A lack of harmonised criteria, data, benchmarking, standard setting and measurement methodologies may be one of the major challenges on the road towards True Value. Many initiatives and frameworks do exist, but without their alignment it will be difficult to realise a transformation on a global scale. “There is, for example, no full alignment on how to measure food nutrition,” Magdi Batato points out, referring to the great variety of schemes including the EU Nutri-Score and Australia’s Health Star Rating System, among others. “We need to acknowledge that we do not have all the information we need just yet,” Batato adds. And thus, finding a robust methodology that incorporates the differences between markets as well as differences between businesses and sectors is an obstacle that remains to be tackled.
Gen Z Calling
Hajar Yagkoubi, former UN Youth Representative for the Netherlands, speaks on behalf of Generation Z, the generation that will make up almost a third of the global workforce in three years’ time. Generation Z is also known as the True Gen, because, Yagkoubi explains, “more than any other generation, we want truth and transparency in our consumption”. For Generation Z, consumption has become a means to express their values and identity. They care where their products come from, what impact their consumption has on the planet.
As the young people of Gen Z are the leaders of tomorrow, this awareness of consumption impact sparks hope for the realisation of a sustainable food system. However, steps must be taken now, or else even Hajar Yagkoubi and her ambitious peers will not be able to turn the tide. Therefore, Yagkoubi calls on all participants of the online session to step up their game and:
- make and publish their impact-weighted accounts.
- remunerate their corporate leaders for True Value creation
- include young people in the boards of their companies.
Practical solutions and recommendations
The road to take is identified, as are some of the obstacles along the way. So, what concrete steps can we take on this road to achieve a True Value of Food framework? Throughout the session, by speakers as well as participants in the breakout discussions, various concrete solutions are identified – many of which are based on examples and experience from practice. One solution is explained in more detail by Rob Zochowski, Programme Director and Senior Researcher for the Multi-Faculty Sustainability and Impact Investing Special Projects at Harvard Business School. Zochowski argues for the adoption of ‘impact weighted accounting’, which he and his team have made accessible by the development of clear and easily applicable frameworks for corporate leaders. With these frameworks, the corporate decisionmakers can “add a monetary value to the impact of corporate activities on, for example, the environment, the public at large, and on employees”. The frameworks help determine the true costs and values of the produced food by attaching a price-tag to such things as nitrogen and phosphor submissions; to the harm done to soil health through mono-cropping; or to the negative health effects, like obesity and diabetes, of unhealthy foods.
If a global, food-systems-wide transformation is the destination, stops on the way will be needed to make it to the end. “The shift necessary to think beyond the price of food to consider its true value may be too big,” Geraldine Matchett states. “Pragmatically, addressing this [shift] per value chain may be best.” Matchett refers to her experience at DSM where they realised promising transformations in the dairy value chain. It may not be possible to tackle the whole food system at once, but we can get there one value chain at a time. And in this endeavour, it is vital that all stakeholders across the value chain are aligned and collaborate. “When this alignment between actors is achieved”, Matchett argues, “scaling solutions becomes much faster and more effective.” While alignment of all stakeholders – including governments, financial institutions, industry, retail – is indeed needed, according to Theo de Jager, the partnership between farmers and consumers should have top priority. “Farmers and consumers are the first and last ring of the food value chain,” he explains. “As consumers buy the food that farmers produce, farmers need to know exactly what they want. You cannot push a chain,” De Jager adds, “you can only pull it, and the pulling force in the market is represented by consumers.”
Speakers and participants generally agree on the necessity of aligning stakeholders at the level of the value chain. However, current confusion and fragmentation at level of the food system also demands attention. At present, there is a vast amount of frameworks, tools, and initiatives, all working towards a sustainable food system, but not working together. If more harmonisation and alignment at this global level is achieved, efforts would be much more effective and impact more durable. The true value approach as explained in the WBCSD publication ‘The True Value of Food. A powerful aid to business decision-making’ could be instrumental in efforts to realise harmonisation. As Nestlé’s Magdi Batato notes: “[This approach] provides a common language – prices – that all stakeholders already understand and work with. It offers a first step towards alignment and understanding of how to assess the trade-offs involved on this journey to achieve the 2050 vision of feeding 9 billion people.” Realising harmonisation, in addition to an actionable framework like the True Value of Food, also demands leadership – from business, finance and, importantly, governments. Formal regulations by governments are a necessary precondition for lasting and widespread change. Government regulations are needed to incentivize the production of healthy and sustainable foods. Additionally, policies should be implemented to ensure fairer distribution of risks and rewards along the food value chain. And finally, governments have an important role to play in raising awareness among consumers – their citizens – to help them make better choices in what they buy in the supermarket.
Finally, leadership is also called for when it comes to the alignment of the various financial flows currently going around in the world of food systems – including private, public, multi-lateral and philanthropic money. It was suggested by a number of participants, that a group of core stakeholders in the food system should embrace the task and take responsibility for realising the financial flow alignment, based on shared targets, coherent policies, and harmonised methodologies and data. If the significant financial flows work in tandem towards a common goal, the transformation of the food system based on fair prices and true value comes within reach.
Practical recommendations in a nutshell
- Adjust prices consumers pay to reflect the true value of food, without compromising access to affordable healthy food; e.g. by lowering the price of healthy and sustainable food.
- To identify true costs and values of food, adopt impact weighted accounting to reflect companies’ value more closely to society.
- Focus on alignment and collaboration of stakeholder within the value chain.
- Invest in scaling solutions that have proven to work within selected value chains: i.e. build a roadmap based on iconic value chains.
- Foster harmonisation by means of such and the true value of food approach to counter current fragmentation of existing frameworks and initiatives.
- Push for formal governmental regulations and policies to create incentives for producers, distribute risks and power along the value chain, and educate consumers.
- Show leadership and create a framework for alignment of financial flows towards a common goal of food systems transformation
A roadmap for the journey
Talking about the True Value of Food and all the complexities involved in realising the needed transformations could have been a very technical and impenetrable discussion. Yet, the online session hosted by Rabobank, the WBCSD, Impact Institute and DSM was anything but impenetrable. Peter Bakker, CEO of the WBCSD proudly reflects: “We are translating this exciting but high-level concept into a practical action plan with examples of early success that can be scaled in business, in policy discussions and in partnerships with our colleagues in academia and civil society.” Indeed, making the concept of the True Value of Food more tangible and actionable is key, Stefanos Fotiou, Director in the Office of the Sustainable Development Goals in the FAO, agrees with Bakker. “It is not just a nice academic exercise. Things [we have discussed here] matter for the lives of the poor people. […] The value and the price of food have the power to realise the eradication of poverty […].”
As the foregoing shows, among speakers and participants there is great energy and motivation to join forces and realise a True Value of Food framework that works for all. And this joining of forces will be essential, Peter Bakker stresses: “We need the partnership between the financial sector and the food- and agribusiness [to move] to a food system that can support 9+ billion people, living well, within planetary boundaries, and at the same time is minimizing climate impact, protecting nature, promoting fair and decent livelihoods.” The big questions with which Berry Marttin opened the session have not all been answered but the road towards the True Value of Food has become a bit more clear. “It is a road that offers big opportunities,” Rabobank’s Marttin stresses. “Opportunities to better assess risks. Opportunities for new business.” And, most importantly, it is a road that we must take together; because only together can we reach our desired destination.
This article is also published on Rabobank.com