We all remember being told to clean our plates when we were kids. Unfortunately, that advice hasn’t stopped food waste from becoming a massive problem in the U.S. At Brown Advisory’s recent “Boston Innovates” event on sustainable food systems, we convened a panel of experts and leaders who are working towards food waste solutions. (The event was held in connection with our sponsorship of the U.S. Food Waste Summit, held June 26–27 at Harvard University.)
Food waste—defined simply as food produced but not eaten—has more than tripled in the U.S. since 1960 and grown by 50 percent since 1990, and as much as 40% of all food in the U.S. goes to waste at some point in the supply chain, according to a 2017 report from the Natural Resources Defense Council (NRDC). This represents a massive setback in terms of hunger; reducing food waste by just one-third would be enough to feed all of the 42 million Americans who face food insecurity. It’s also a problem for climate change—almost all uneaten food in the U.S. ends up rotting in landfills, where organic matter accounts for 16 percent of U.S. methane emissions, according to the Environmental Protection Agency. Finally, food waste is responsible for massive financial losses—the value of food wasted in the U.S. currently comes in at approximately $218 billion per year, according to ReFED, a nonprofit focused on reducing food waste,
While cleaning our plates might help, it wouldn’t come close to solving the problem entirely. ReFED's analysis shows that about 43% of food waste in 2015 was generated by households, but the majority occurred elsewhere—farms, manufacturers, grocery stores, shipping losses and restaurants.
As sustainable investors, one of the things we look for are challenges that create financial costs and thus opportunities to reduce those costs. Food waste is certainly one of those challenges, as shown in the chart below. The cost for end consumers that pay retail prices for food is highest, but there are meaningful costs across the food supply chain.
Source: ReFED (annualized estimates updated as of Mar. 31, 2016).
These costs create opportunities for a variety of businesses. In some cases, companies are able to reduce their own costs (and by definition improve their profit margins); for example, Marriott International is focusing meaningfully on food waste, and recently set a waste reduction goal of 50% percent by 2025. It participated in a pilot project of the American Hotel & Lodging Association that lowered overall food costs by more than 3 percent—a meaningful figure for a business that operates on relatively thin margins.
In other cases, firms can turn these costs into revenue opportunities, by creating new products and services that help their customers reduce food waste. Ecolab is a good example; it works with many grocery stores and other distributors of food that end up wasting food due to poor labeling (unclear labeling on products and shelves can often lead to premature disposal of food fit to be eaten). Ecolab’s Prep-N-Print program, according to the company, assists in waste reduction through automating the labeling process and capturing accurate product shelf life.
Food waste touches multiple issues that present material risks and opportunities to investors, from the immediate cost of discarded products to the longer-term implications of climate change. We believe that corporations will need to play a big role in a comprehensive long-term food waste solution, and the companies who proactively address this challenge may find ample opportunity to drive revenue and profit along the way.
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