Reducing food waste could yield $700 billion in savings

06 September 2018 Authored by Consultancy.uk

A third of the food produced worldwide is wasted annually, costing the global economy a staggering $1.2 trillion. A new analysis has offered five moves that could shrink the value lost from food waste by up to $700 billion, improving human and environmental wellbeing in the process.

According to multiple noted academic studies, the world already produces more than 1.3 times enough food to feed everyone on the planet. In simple terms, while resource shortage and population size are often stated in plain terms as being the route of starvation across much of the world, global farming actually produces enough to feed 10 billion people, 2.4 billion more people than exist today. The global population is expected to peak and plateau at that level by 2050, but by the UN’s reckoning, the 795 million people currently going hungry in the world are likely to have grown in number to 2 billion by then – in spite of there still statistically being enough to go round.

This is because large swathes of the world simply cannot afford to buy the glut of food being produced by industrial farming. As a result, while this is indeed a time of plenty, using the profit motive as a mechanism for the distribution of the necessities of life translates to millions being priced out of the market, and record levels of food going to waste while millions starve. With single-use plastics, which are often used to extend the shelf-life of produce, now coming under intense scrutiny, waste levels could be exacerbated further, without major action on the part of governments and businesses.

Food loss and wasteAt present, the total value placed on wasted food is estimated as being in excess of $1.2 trillion, before even considering the significant resources allocated to the production of the 1.6 billion tonnes of food that are ultimately left to rot, or the 8% of global emissions this yields. According to a new report from The Boston Consulting Group – produced in conjunction with Food Nation and State of Green – this problem presents a colossal opportunity for companies willing to do the hard work to tackle it, however.

The researchers found several key areas in which some of the problems with the current model for food production and distribution can be improved, resulting in a $700 billion reduction in waste in the best-case scenario. While this is still well short of the elimination of waste, it would represent a significant step forward for what has been a decades long economic and environmental failure on the part of the current system of trade and production.

As it stands, production is the segment which incurs the highest level of waste, simply rejecting more than 500 million tonnes of produce per year on cosmetic or size grounds. This translates to around $230 billion in value, with the majority of waste by weight sourced from fruit and vegetables, although considerable levels of cereals, roots and tubers are also wasted. Handling and storage practices also lead to considerable resource wastage, at around 350 million tonnes per year. Of this, fruits and vegetables are again an area of significant loss, followed by roots, tubers and cereals. Value lost in this segments stands at around $120 billion annually.

Retail and distribution meanwhile contributes around 200 million tonnes of food waste annually. While it would be reductive to simply consider this issue in monetary terms, in order to get the attention of profit-chasing food distributors, BCG highlighted that this costs upwards of $210 billion – while consumers waste around 340 million tonnes of food, costing around $500 billion in total globally.

The $1.5 trillion lost opportunity

Commenting on the shocking figures, Esben Hegnsholt, a BCG Partner and co-author of the publication, said, “Roughly one-third of the food produced around the world goes to waste. This represents a challenge so massive that it was included in the United Nations’ Sustainable Development Goals. But while it is a daunting problem, there are steps that can be taken today, actions that draw on currently available technology and know-how, to dramatically slash food loss and waste across the value chain.”

What is worse, while the population grows, potentially increasing the market to which produce can be sold, losses are only projected to grow. The firm’s analysis shows that by 2030, total losses will surpass $1.5 trillion. Meanwhile, this growth in waste will likely have a significant environmental impact, causing harm to both humans and the wider eco-system. This could have major repercussions for the future production of food itself, as well, limiting the locations it can be produced, the fertility of land and even the health and nutritional quality of what farmers are capable of growing.

Hungry for change

Changing the situation is therefore of key, with the report noting five key areas in which focus could reduce waste by that previously mentioned $700 billion. These include, “awareness of the issue and of possible solutions, inadequate supply chain infrastructure, supply chain efficiency efforts that do  not focus sufficiently on food loss and  waste, weak collaboration across the value  chain, and insufficient regulations.”

Increased awareness around food seasons for consumers could significantly reduce demand for out of season fruit and vegetables, whose transport cost for fresh produce can be significant, though placing an individual onus on this could limit its effectiveness, while ignoring more structural issues causing food waste. Increased awareness was also mentioned around frozen vegetables as an alternative. In total, around $260 billion in waste can be avoided by increased awareness in all parts of the value chain around waste reduction.

Thirteen initiatives to cut food waste

Improvements to infrastructure to store food, particularly cold storage, is able to significantly reduce food loss in the supply chain by preserving and extending the life of products, saving up to $120 billion. Elsewhere,  supply chain efficiency, from digitalisation to improved integration between suppliers, could see a $120 billion reduction in waste.

Changing in payment schedules and better understanding of production cycles could see a further $60 billion in waste reduced, as farmers are better able to avoid early harvest to meet retailer expectations. Finally, regulation to punish companies for wasting food could be introduced, current incentives create a perverse environment in which waste can be beneficial to company books. Incentives could also be put in place to reduce waste, while rules around food use-by dates could become less restrictive – they tend to be on the conservative side.

Shalini Unnikrishnan, a BCG Partner and fellow co-author of the document, said of the findings, “While many stakeholders have a part to play in combating food loss and waste, the role of companies is perhaps the most critical. Companies are involved in every aspect of the food supply chain, from production through to consumption, and as a result, their decisions and actions have an outsized impact. At the same time, they have deep expertise, insight on potential solutions, and the money to make those solutions happen—which can ultimately help their bottom lines.”

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