A breath-taking one-third of all food produced is lost or wasted, according to the Food and Agriculture Organisation (FAO). Globally, this translates into 1 billion tonnes of food, or a $1 trillion economic loss each year – and accounts for 6-7% of global greenhouse gas emissions. The losses go on: food that is harvested, but subsequently lost or wasted, guzzles about a quarter of all water used by agriculture, and consumes a land mass the size of China in growing space each year.
With 820 million people going hungry every day, this is a truly woeful situation.
Measuring the challenge
Food loss and waste is a complex subject, and it is very difficult to source reliable data. The statistics above are, by the FAO’s admission, only broad estimates. The ‘measure’ element of the Target-Measure-Act approach tries to rectify this data problem. It’s tough. There are many theoretical and technical problems in measurement – should we focus on quantity of waste, or economic value or calories lost? Is food recycled as animal feed waste? Should the avocado stone and peel be included when making loss measurements?
For the sake of definition; food losses occur along the food supply chain from harvest/slaughter/catch up to, but not including, the retail level. Food waste, on the other hand, occurs at the retail and consumption level. Food diverted to other economic uses, such as animal feed, is not considered as quantitative food loss or waste.
Globally, the ambition for reducing food loss and waste is enshrined in the UN’s Sustainable Development Goal (SDG) 12.3. The goal is to, by 2030, “halve per capita global food waste at the retail and consumer levels and reduce food losses along production and supply chains, including post-harvest losses.” It also links into many of the other SDGs, including for example SDG 1 – ‘No Poverty’, SDG 2 – ‘Zero Hunger’, and SDG 13 on climate action. Across the board, the SDGs aim to cut negative human footprints on land, water and carbon, while increasing food security and lessening poverty.
Product waste and loss: not good for business
Putting personal views on the immorality of food waste aside, this is a very serious business issue – one that is highly relevant for us as investors in three major UK food retailers. First off, in any business, waste negatively impacts margins. Reducing waste therefore improves profitability. Second, as consumers become ever-more educated on these issues, food waste is bad for a retailer’s brand and image. Third, food losses push up food prices, impacting demand. And finally, waste at the retail end of the food chain has the greatest impact from a greenhouse gas emission perspective. Food that has gone from growing and harvesting, to processing, to potentially chilled store shelves, with transportation in between, has accumulated the maximum amount of emissions for the food chain. Added to the emissions caused by waste from the end consumer, it ramps up Scope 2 and Scope 3 emissions for our investee companies, exposing them to increasing carbon prices and the costs to mitigate emissions.
Our investee companies are focused on meeting the SDG 12.3 goal. All three have committed to halving food waste by 2030 and they have also signed up to the UK-specific Courtauld Commitment 2025.
Tesco is a company demonstrating leadership on the issue. A member of Champions 12.3 (a coalition of stakeholders to driving the agenda to achieve the SDG 12.3 target), it has reduced total food waste by 15% since its 2012/2013 base year. Tesco and Morrisons have tried to tackle the problem of the desire for food products to meet aesthetic standards in terms of colour, shape and size via their ‘Perfectly Imperfect’ and ‘Naturally Wonky’ ranges, respectively. Our three retailers (including M&S) are partnering with numerous charities to redistribute surplus food; these charities include FareShare, FoodCloud, City Harvest, The Bread and Butter Thing and the Felix Project.
Careful how we judge
Nevertheless, they continue to contribute to the UK’s approximately 10 million tonnes of wasted food every year. Tesco’s UK operations contributes 41 thousand tonnes of net food waste, after redistributions to charities and recycling of food waste as animal feed. This is an underestimate, as it doesn’t account for waste in the supply chain or by the end customer resulting from retailer behaviour. However, before we get too harsh with Tesco and its peers, the pie chart points to us, the end consumers, as by far the biggest culprits of food waste. We account for 70% of UK food waste post farm-gate; retailers directly account for less than 3%.
The good news is that on a national level, the UK, along with the Netherlands, is leading on the SDG 12.3 goal. The UK has reduced food losses and waste by 27%, so we are over halfway to hitting the 2030 target. Organisations such as WRAP are doing heroic work in driving the agenda. We will support this agenda by encouraging our three food retailers to continue to reduce food waste, and to go faster if possible. As a team and as a firm we are also supporting one of the charities mentioned, the Felix Project, in redistributing surplus food to London-based charities.
This is one of those sustainability issues where we are totally aligned in our fiduciary duty to our investors, and to the interests of wider society. We are aligned with those stakeholders in our local community and globally who want to tackle climate risk, hunger and poverty. Meanwhile, if our investee companies are successful in reducing waste, they will be more profitable, enjoy enhanced brands – and thereby generate more attractive returns for shareholders.
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