True Cost Accounting (TCA) is an evolving methodology that offers a comprehensive view of the economic, environmental, and social costs associated with products and services.
Emerging from the environmental movement of the 1960s and 70s and refined in the early 21st century, TCA has primarily been applied in food and agriculture to reveal hidden costs like soil degradation, water pollution, and greenhouse gas emissions.
Central to TCA are the "four capitals":
Natural capital refers to resources like water, atmosphere, soil, and biodiversity. Social capital encompasses community relationships and societal well-being. Human capital is about skills, health, and labour. Produced capital includes infrastructure and technology. By evaluating these four capitals, TCA provides a more holistic understanding of the real costs and benefits of a product.
Integral to TCA is carbon accounting, which focuses on measuring, accounting for, and managing greenhouse gas emissions. This aspect of TCA helps businesses and policymakers understand the carbon footprint of activities, guiding efforts to mitigate climate change by reducing emissions. As such, carbon accounting is a crucial part of assessing environmental impact within the TCA framework.
Globally, TCA is gaining momentum, especially in Europe in sustainable agriculture. It is now also being applied in sectors like manufacturing and energy, driven by a growing consciousness about sustainability. The method is championed by organisations like the Sustainable Food Trust and is becoming integrated with policy discussions and business strategies.
As we look forward, TCA's relevance is set to increase as it aligns with global efforts to tackle climate change and social inequality. Consumer demands for transparency, coupled with potential regulatory changes, are expected to fuel its broader adoption.
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