Seminar für ländliche Entwicklung

What value(s) of food do we want to add?

We need a new understanding of "added value" along food value chains to promote a shift toward sustainable food systems.

H. Stöbesand

A key concept in the context of food value chains is, of course, the concept of “value added”. Conventionally, “value added” is defined as the difference between the price of a product and the cost of producing it.

So, simply put, value can be added if consumers are willing to pay more for a product than it costs. When it comes to food, value can, in the usual understanding, be added through processing, storing, or transporting food. Consumers’ willingness to pay (more), based on perceived value, can also be influenced by marketing, which, along this line of thought, also adds value.

In order to increase a food product’s value, farmers and businesses seek to decrease production costs, increase technical and economic efficiency and productivity, and/or influence consumer decisions, e.g., through advertising, colorful packaging, or a long shelf-life – anything that can help fetch a higher price.

While widely used, this conventional understanding of “value added” is not helpful in guiding a transformation towards sustainable food systems. We need a new understanding of value – one that helps focus on ecological and social goals.

Let’s look at the conventional conceptualization of “value added” a little more carefully. It has three main implications:

  1. the price determines a product’s value
  2. the subjective preferences of end consumers (their willingness to pay) ultimately decide if a food product has value, and
  3. the lower the costs of production, the greater the “value added”: the “externalization” of environmental and social costs is a competitive advantage

Price equals value: effectively a tautology

A product’s “value” is measured by its price, and prices are thought to reveal a product’s value. So, if we can sell a product for a higher price, it has “added value”. That means that any (successful) economic activity could be said to generate value – even if it has harmful social or ecological consequences. And anything that contributes to ecological and human welfare, such as clean air, but has no price, has de facto no value.

As a result, the perception of prices as adequate proxies for value thwarts a critical investigation into how value is created (the conditions of production) and its effects (outputs) on the environment and society (Mazzucato 2018). Moreover, equating price with value obscures the fact that prices are not “neutral”: prices are not only the product of supply and demand but influenced by social power relations and financial markets. For example, financial speculation led to price spikes of key food products in 2008, when millions of people could no longer afford staples such as wheat or maize. The 1943 famine in Bengal, which claimed the lives of 3 million people, was due to war-time inflation (which recent evidence suggests was politically induced by the British to finance war spending, see Patnaik, 2021).

So, the term “value” has lost any orientation towards valuable goals. The equalization of value and price does not actually reflect what is ecologically or socially valuable. It is a tautology: it has zero informative content.

Consuming the world a better place?

In utilitarian logic, aggregate effects of consumption steer the way towards the “common good”: if individual consumers are able to maximize their desires, the end result will benefit everyone, and the aggregate of individuals’ actions will reflect what is valued and what is not. Simply put: if there is a market for a product, it must be valuable.

This is problematic in at least three ways: it ignores power asymmetries and social inequality, it does not account for information failures, and it makes naïve assumptions about economic behavior.

First, if consumers, and consumers only, determine the “value” of a product, those with more purchasing power will be more able to influence what is being produced and for whom. This view encourages the development of food value chains that are largely export-driven, as they can fetch a higher price and, in this understanding, value. It also implies that the choices of people who cannot consume, i.e., non-market stakeholders such as subsistence-oriented farmers or future generations, are not considered. Neither are the needs of non-humans such as animals or ecosystems.

This conception of “value” is thus fairly undemocratic and apolitical: value is not a matter of political debate (what goals do we want to achieve for whom?) but based on the ability to pay. This relegates social-political issues that should be publicly debated by citizens, i.e., questions related to sustainability and food, to the purview of market actors, i.e. consumers – particularly those with the greatest purchasing power. Some critics have called this the “commodification” of politics and sustainability.

Second, and based on insights from behavioral economics, psychologists and social anthropologists, consumers are in most cases not able to obtain and process all the information needed to judge if a product is actually “sustainable” (‘bounded rationality’). For example, many consumers are not aware of the long-term health impact of their consumption choices, or that child labor or logging of primary forest was required to make their candy bar. Consumers are also easily influenced by marketing strategies and misleading labels.

Third, even if consumers were rational and had knowledge that was not influenced by merchandising, psychologists have found large gaps between consumer awareness, behavior, and impact. For example, a study on ecological footprints of different consumers found that while ecological footprint increased with income, pro-environmental behavior and awareness for it did, too – an apparent paradox (Csutora 2012). Other examples include the rebound effect, where efficiency or decreased costs often increase consumption, or the licensing effect, where supposedly “virtuous acts” such as buying green lead to subsequent antisocial and unethical behavior.

A consumer driven understanding of “added value” therefore has unrealistic expectations about consumers’ ability to make the “right” choices, i.e., to contribute to the common good through their consumption (“making the world a better, more sustainable place”). In other words, a consumer-driven understanding of value depoliticizes sustainability and food – and if consumption is indeed understood as a social “vote”, it excludes both large segments of humans (including future generations) and virtually all non-people.

Externalization of costs as a competitive advantage

The conventional understanding of “value added” encourages the ‘externalization’ of ecological and social costs. Since neither ecological nor social costs or benefits are implicit in the mainstream understanding of “value added”, they appear only as “addons” or potential sources of revenue and competitiveness, not as primary goals of value chain development. This is at odds with a strong sustainability perspective, in which ecological and social welfare have intrinsic value and are not merely sources of potential economic revenue.

We need a new understanding of value

While “value” was introduced into economics a few hundred years ago as a normative concept to describe what purpose economic activity should serve, it has lost any orientation towards desirable ecological and social goals. It has become normatively empty: anything that sells has value. It has driven the externalization of costs. And it entails unrealistic expectations about consumers’ ability to focus on the “common good”. Obviously, this understanding of value cannot guide the transformation towards sustainable food systems.

We need a new understanding of “value” – one that can help us focus on ecological and social welfare within planetary boundaries. Initiatives such as TEEB, the “Economy for the Common Good” or True Cost Accounting have already paved the way towards a new understanding of value – one that helps us switch the focus from prices, productivity and efficiency gains to a focus on the wider impacts of food production on ecological and human welfare.

It is up to us to critically interrogate the concepts we use on a daily basis – concepts that over the centuries, have become so ubiquitous that we forget to question what they actually mean. Worse still, they drive us to focus on the wrong policy goals.

This is an invitation to reflect on our understanding of value added – because the transformation of our food systems starts with changing the way we think, and, most importantly, value.