12th EOC: Who pays the true costs of food production?

The continuous and overproportional growth of organic produce at retail markets could have justified some shoulder-patting by Bio Austria and IFOAM EU, the organizers of the 12^th European Organic Congress which took place in Vienna from September 25th - 27th. However, in his role as president of IFOAM EU, Jan Plagge reminded the attendees of the organic movement’s founding values: „We should not talk about how to organize growth, but talk about how to organize transformation.“ If the EU was to reach the IFOAM vision’s target of 50% organic farming by 2030, this would only be possible through a transformative process rather than conventional economic models.

Fabio Brescacin, CEO of the Italian organic retail chain NaturaSi made a similar point: While consumer demand remained constantly on a high level, prices for organic produce did not. „Thirty cents for one kilogramm of wheat at wholesale level – this can never be the kind of organic we have in mind“, said Brescacin. „Some will call me crazy, but I think it should even cost one Euro. At least, if we want to stay true to our values.“

Organic trade must provide more information about the value of its goods

Brescacin invited organic retailers to inform their customers better about the true values created by ecologically and fairly produced food – as NaturaSi already does by offering flyers about fair pricing on certain items. The ecological and social problems with cheap food then would become more apparent to customers. Each year, field workers die in Italy, Brescacin said. „But most people don’t realize they are co-complicit. They simply don’t know that a kilogramm of conventional tomatoes makes only eight cents for the producer.“

What retail prices never show

How strongly the organic sector could differentiate itself by more transparent pricing was the focus of a workshop on „True Cost Accounting“. The Italian agricultural economist Gianluca Brunori explained how „full costs“ are almost never shown in a typical market or retail price, because the negative as well as positive side effects of production remain mostly hidden. Whether social problems such as inadequate wages and child labour, or positive effects on the environment such as soil protection and better biodiversity, they are all not being reflected in normal trade prices.

Please read Eosta's study:
True Cost Accounting for Food, Farming and Finance

Model: Chocolate manufacturer Tony's Chocolonely

In a quality-based competition, organic producers, manufacturers or retailers could communicate their social or environmental benefits and therefore argument for higher prices or obtain better market shares, said Brunori. Adrian de Groot Ruiz, co-founder of the NGO „True Price“ validated this by the example of one of his customers, the chocolate manufacturer Tony’s Chocolonely. Since the company communicated its target of „100% slave-free chocolate“ it gained 179% in revenues.

True prices as a risk management strategy

Though, Professor Brunori criticised that such labelling could be misused by some companies and that seamingly “transparent price calculations” would have got to be regulated strictly.

"The value of corporations will be measured
by their positive impacts on the environment or on society.“
– Inka Sachse, Soil & More Impacts

In contrast, Inka Sachse from the consulting firm Soil & More Impacts stressed that such calculations might even be necessary in the future for companies in the agricultural and food sectors in order to obtain cheap insurance or loans. Mainly due to climate change, ecologically poor production methods are increasingly becoming an unexpected risk factor for companies: The handling of resources, including so-called “human capital”, is already an important criterion for international rating agencies such as Standard & Poor's, Sachse said. „That means the value of corporations will be measured by their positive impacts on the environment or on society.“ For the organic sector it had of course always been a clear understanding that investments in composting or crop rotation would pay off in the long run. “But some people only understand the language of money.”

Wrapping up the 2 #12EOC parallel sessions on: The new #CAP proposal - New Delivery Model, policy architecture and #organic farming; and Improving competitiveness in the organic production chain: focus on true cost accounting with @c_micheloni pic.twitter.com/Sosk1nGiaK

— IFOAM EU (@IFOAMEU) 26. September 2018

Source: Twitter

Subdued expectations for the new CAP

When either the rules of our markets or the willingness of consumers to pay a higher price turn out to be insufficient for sustaining a better way of farming, will the Common Agricultural Policy (CAP) for the EU save the day? The panel discussions on the new CAP after 2020 took a similar turn as many informal conversations at the organic buffet: The expectations of the organic sector about this policy reform are rather conservative.

Tassos Haniotis from the European Commission was introduced as the „architect of the CAP“ and explained the new flexibility which the members states will probably have when it comes to allocating the funds of currently 55 billion Euros to their farmers. „We have seen that, despite the best intentions, Greening failed“, Haniotis introduced the new approach and continued: „Because it tried to apply a common solution to uncommon problems. What we want to do now is to increase the overall level of conditionality – which is mandatory – but at the same time prepare the grounds for different types of transition methods, from conventional to more ecological agriculture. That way you can have many schemes, for example organic, but also precision farming.“

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Ambition might not come from Brussels

In reaction, Jan Plagge shared his fear of a „race to the bottom“ in which member states could opt for the easiest and most voter-friendly way of handing out money, while more ambitious ecological plans might fall behind. And Herbert Dorfmann, a member of the EU Parliament, asked: „Do we as politicians have a clear objective where the agricultural sector will move to in the next decade or so? I am not optimistic about that.“ While the EU had a romantic picture of family farming in mind, in reality it was mainly supporting „the industrial model“, Dorfmann said – and noted this dynamic for the organic sector as well.

Sonnentor-founder and self-proclaimed, highly successful ‚nutcase’ Johannes Gutmann therefore advises the small and big players of the sector to stop worrying about what Brussels might decide. He instead lightened the overall mood with a strong slogan: „Don’t panic, the future is organic.“