What is it?
True Cost Accounting (TCA), sometimes called Full Cost Accounting, is a system of cost accounting in which the true costs of a product or service are fully measured. Social and environmental costs are included as external costs in the product price.
Sounds complicated? What’s it good for?
Let’s start from the beginning: Both conventional and organic farming have impacts on:
- The natural environment: Through irrigation, fertilization, soil cultivation, pesticide use, deforestation, and more.
- People: Through the use of substances that affect health, as well as the prevailing working conditions.
These impacts create costs that are not reflected in the product price. This means that no one currently pays for the polluted environment or the social damage – neither the companies that cause them, nor you as a consumer in the supermarket.
An example: TEIKEI Olive as a pioneer project
TEIKEI Olive serves as a pioneering example where the success of True Cost Accounting and sustainable agriculture can be demonstrated. Let’s say one liter of olive oil would pollute 100 liters of water. How much are these 100 liters of polluted water worth? True Cost Accounting tries to find out exactly this and then include these costs in the product price. This could mean that a liter of olive oil becomes more expensive.
The questions from TEIKEI
TEIKEI has asked itself the following questions:
- How much environmental and social costs do we generate?
- How much more should our olive oil cost?
- How can we give back to nature?
Extensive data were collected directly from the farmers, and values in the areas of soil erosion, water pollution, water consumption, substance use, transport, and emissions were calculated. With the help of True Cost Accounting, these costs were then translated into a monetary value.
The results
It turned out that TEIKEI Olive, through its practice of regenerative agriculture, not only has very few negative environmental impacts but also gives back to nature. This is especially true through soil building via permanent planting, natural fertilization, and minimal cultivation. While olive groves in Greece are generally very prone to erosion, the opposite happens with TEIKEI farmers! In fact, we sequester more CO₂ than we emit.
Costs and benefits
Like all food products, TEIKEI Olive’s olive oil causes costs for nature. However, these costs are not only compensated for, but we even pay back nearly 13 cents per liter more than necessary. Regenerative agriculture works!
Room for further research
True Cost Accounting is a new and highly complex field. We have managed to gain a rough estimate of the impact of our actions. However, this is not enough for us, and we want to know much more precisely about our interaction with nature to continually improve. We will keep at it!
You can find the entire master’s thesis by Selina Wolf, who interviewed us on this topic, at this link.