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From Food Waste to Future Value

Economic Report

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  • A third of all food produced globally ends either as food loss or food waste
  • If we waste 50 percent less globally every year, our footprint decreases co2 with the equivalent of all cars in Europe not moving for a year
  • Of the 1,200 companies that participated in the Champions 12.3 research, half saw a return on investment of 1400 percent or higher
  • A sensible way of starting to reduce food waste focuses on the measurement and subsequent valorisation of waste streams

Co-author: Justin van der Sluis

Food waste is a global problem – and, at the same time, a great opportunity to feed the world sustainably. Each year, around 1.3bn tonnes of food are wasted worldwide, which, according to the Food and Agriculture Organization of the United Nations (FAO), amounts to one-third of all food produced. Clearly, this is an inefficient way of using resources, has a negative impact on the economy, is a threat to food security, and limits the availability of resources like water and land. With the Sustainable Development Goal 12.3 (SDG 12.3), the United Nations is committed to halving the global amount of food waste and food loss per person by 2030. This contributes to one of the biggest challenges of this century: better food for more people.

Reducing food waste doesn’t only benefit nature (lower ecological footprint) and food security; it also potentially has large financial benefits for companies that take part in the food chain. According to a study conducted by Champions 12.3, 99 percent of companies that invested in reducing food waste have a positive return on investment. Of the 1,200 companies that participated in the research, half even saw a return on investment of 1400 percent or higher. FAO estimates that the total annual cost of food loss and waste for the global economy is USD 940bn – an enormous amount that leaves sufficient room for innovations and improvements towards reducing food waste and food loss by both consumers and food & agribusinesses… turning food waste into future value.

Full infographic (PDF)

What is food waste and food loss?

A lot of different definitions are used globally when it comes to food waste and food loss. This can make it difficult for companies to know what is included in the definition and what is not – let alone how they can contribute to SDG 12.3.

One of the first discussion points is the distinction between food waste and food loss. Food loss focuses on losses generated from the farm to the retail stage. Food waste completes the value chain by focusing on waste generated at the retail and consumer level. In the rest of this note, we will use ‘food waste’ to refer to both waste and loss.

For food waste, Rabobank applies the definition and assumptions that Champions 12.3 uses, namely: Food waste and food loss is food that was produced for human consumption, but ended up being wasted during harvesting, transportation, storage, processing, or by retailers and consumers. Food that was produced for human consumption, but (partly) re-used for animal feed, biomaterials, or medicines is not defined as food waste.

It is also common to make a distinction between avoidable and unavoidable food waste. Avoidable food waste is food that could have been consumed; unavoidable food waste is inedible food like peels, bones, and certain seeds. SDG 12.3 includes both avoidable and unavoidable food waste in its definition of food waste.

Box 1: Sustainable Development Goal 12.3

With a mission to end hunger and poverty, to protect the planet, and to increase wellbeing, the United Nations launched its 17 Sustainable Development Goals in 2015. Goal 12 is about securing responsible consumption and production. The sub-goal 12.3 is about reducing global food waste and loss per person by 50 percent by 2030. This includes both companies and households.

Where is most food waste generated – and what are the causes?

According to FAO, one-third of all food produced globally is wasted. This wasted food uses a quarter of all of the water and land used in agriculture. This is an area as big as China, responsible for 8 percent of global greenhouse gas emissions (GHG).

Where exactly food waste takes place in the production chain differs between countries. Less-developed countries usually see more food waste early in the production chain – for instance, during harvesting or storage. Developed countries have less food waste in this early stage, but more food ends up being wasted by consumers later on (see figure 1).

Figure 1: Less developed countries waste more food (in kcal) during production, while developed countries waste more food during consumption*
Figure 1: Less developed countries waste more food (in kcal) during production, while developed countries waste more food during consumption** Note: Total number may not always amount to 100 due to rounding up/down.
Source: World Resources Institute, Food and Agriculture Organization of the United Nations 2011.

There are a couple of main causes that lead to food waste in developing countries. Most are related to a lack of financial resources or knowledge. Farmers sometimes harvest too early because of capital needs or the lack of working assets. Food waste also occurs due to a lack of proper (acclimatised) storage facilities. Meanwhile, developing countries also lose more food than their industrialised counterparts during processing and transportation. On the other hand, according to FAO, consumers in developing countries waste less food.

In a more developed country like the Netherlands, waste occurs at all levels, but is most noticeable at the consumer and retail level. In 2015, total Dutch food waste was estimated to amount to between 1.4bn kilograms and 2.1bn kilograms: all avoidable food waste.[1] When unavoidable food waste is included, this number rises to between 2.6bn kilograms and 2.9bn kilograms. In 2016, research commissioned by the Dutch Ministry of Infrastructure and Water Management found that, on average, households wasted 61.4 kilograms of food per person – of which 41.2 kilograms was avoidable food waste. According to Voedingscentrum, this means that, of total avoidable waste in the Netherlands, households are responsible for 27 percent to 39 percent.

There are multiple causes. Consumers, for instance, buy more than they can consume, or have difficulties estimating if food is still edible or not. Supermarkets tend to prevent having empty shelves by buying more food than they will actually sell, in turn generating food waste. Although consumers and retail generate a substantial part of food waste, there is room for efficiency along the entire food chain. The Dutch fresh produce sector is renowned for its efficiency, but even there, residual waste streams are only partially valorised.

Sometimes food waste is caused by market imperfections – especially when the benefits of an investment by one party create returns for a third party. For instance, if governments invest in food waste, most of the benefits are for households. Or when a producer invests in packaging that will increase shelf life, the benefits are mainly for the retailer or consumers (Timmermans 2009). Close cooperation within the food chain is therefore essential to distributing costs and benefits equally.

Thus, a lot of food is wasted, while one out of every nine people in the world are undernourished. And the challenge of feeding all people across the world is becoming even bigger, with current expectations of a global population of 8.6bn in 2030. What’s more, not only the number of people is increasing – per capita GDP is also increasing. This means that consumption patterns are changing, and people are starting to consume products that seize more water and land during production.

Turning food waste into future value

Figure 2: The value ladder of valorising food waste
Figure 2: The value ladder of valorising food wasteSource: Champions 12.3 2017, Rabobank 2018

Less food waste can be profitable for the whole ecosystem of stakeholders – the government, companies, and households – financially, as well as non-financially. We can contribute to SDG 12.3 by preventing and reducing food waste, focusing on innovations form farm to fork. A sensible way of starting to reduce food waste focuses on the measurement and subsequent valorisation of waste streams (see figure 2). The higher up the value ladder, the higher the valorisation.

 

 

 

 

 

Box 2: How can we valorise food waste streams?

Reducing food waste contributes to transforming the food chain into a circular food system. In a circular food system, the raw materials and products are optimally used to prevent spilling valuable natural resources, e.g. soil depletion or water shortage.

Financial opportunities for consumers

FAO made a rough estimation of the costs of food waste and food loss, estimating that industrialised and developing countries lose around USD 680bn and USD 310bn, respectively, each year. The financial opportunity of reducing food waste is therefore quite substantial.

A convincing example is the UK. Authorities in London managed to lower food waste from households by 15 percent, by creating awareness and introducing changes in labelling. Meanwhile, changes in food prices during the campaign also explained part of the drop in food waste. For every invested British pound, the authorities themselves saved around eight pounds, due to, among other things, less waste processing. However, when household savings are included, the return on investment increases a lot. That same invested pound then saves around 92 pounds.

The future value of food waste for F&A businesses

For F&A businesses, the return on investment can also be substantial. Champions 12.3 compared 1,200 international companies who invested in reducing food waste, looking at investments and subsequent returns. Results indicated that 99 percent of the companies made a positive return on investment. Half of the companies that invested in reducing food waste earned at least
14 US dollars for each dollar they invested. Companies with the highest ratios were mainly restaurants. Hotels, foodservice companies, and food retail businesses mainly saw returns of between 5 percent and 10 percent. Companies at all different stages along the production chain were among the 1,200 businesses – and for all companies in the food chain, it has been profitable to invest in valorising residual waste streams. The similarities between companies with the highest return on investment are that, up until then, none of them spent a lot of time reducing food waste. This indicates that returns on investment are highest for low-hanging-fruit types of projects.

The non-financial value of less food waste

In addition to the financial value of reducing food waste, companies also gave non-financial reasons as to why they started to change their behaviour. In interviews held by Champions 12.3 and Rabobank, companies said that there were several strategic reasons to reduce food waste – the most important: food security, waste regulations, environmental sustainability, stakeholder relationships, and a sense of ethical responsibility. To put these non-financial values into numbers, we looked at the amount of greenhouse gas emissions and water use prevented or reduced when food waste is reduced by 50 percent (see Box 3). 

Box 3: 50 percent less food waste… what does it mean?

Globally, when everyone reduces their food waste by 50 percent, this lowers the footprint by approximately 2,730m tonnes of CO2-equivalent each year. This amounts to 585m passenger cars (derived from Eurostat figures) not moving for a year – or, in other words, twice the amount of all passenger cars in Europe. The global water footprint also shrinks substantially when we reduce our food waste by 50 percent – by around 1,938,092,000,000,000 litres each year. According to FAO, this equals more than three times the total freshwater used in China in a year.

Kickstart the opportunity

Since we know that reducing food waste has an impact from both a societal, as well as an entrepreneurial point of view, we see various opportunities. In addition to the opportunity of creating more awareness surrounding this topic, we can expect to see great benefits from valorising residual waste streams within each and every company within the food chain. To kickstart this topic, there is a special need to cooperate on the investment case as soon as possible – by governments, companies, industry leaders, and multi-stakeholder platforms.

Footnotes

[1] Wageningen University & Research (WUR) includes the re-usage of food produced for human consumption as feed in its definition of food waste, while Rabobank uses Champions 12.3’s definition, in which feed is not seen as waste. This is why the amount of feed was subtracted from the published amount of food waste by WUR – namely 1.7bn kilograms and 2.5bn kilograms.

References

FAO (2011). Global food losses and food waste. Extent, causes and prevention.

FAO (2016). Food waste: A global challenge, a local solution.

Timmermans, T. (2009). Voedselverspilling. Aangrijpingspunten voor beleid vanuit de consument.

Champions 12.3 (Hanson, C. and Mitchell, P.) (2017). The business case for reducing food loss and waste. A report on behalf of Champions 12.3.

Champions 12.3 (Hanson, C.) (2017b). Guidance on interpreting sustainable development goal target 12.3.

PBL (Rood, T., Muilwijk, H., and Westhoek, H.) (2017). Food for the circular economy.

Voedingscentrum (2017). Oplegnotitie voedselverspilling bij huishoudens in Nederland in 2016.

WUR (2017). Monitor voedselverspilling. Update 2009-2015.

Environmental Protection Agency, Greenhouse Gas Equivalencies Calculator.

Waternet, Gemiddeld waterverbruik.

UNESCO, Water footprint of crop and animal products: a comparison.

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Author(s)
Tara Janssen
RaboResearch Netherlands Rabobank KEO
+31 6 8217 2389
Lisette van de Hei
RaboResearch Netherlands Rabobank KEO
+31 30 21 62666

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