The Food Waste Challenge: Addressing the problem through impact investing
Updated: Sep 15, 2021
By Foo Yu Lin, Soeren Petersen | 7 April 2021
Enough food is produced to feed the world today but 690 million people still go hungry. The UN Environmental Programme‘s 2021 Food Waste Index estimated that 931 million tons of food was wasted globally in 2019, amounting to 17% of all food available for consumption. Food loss and wastage is one of the food and agricultural sector’s largest sustainability challenges, with a myriad of environmental and social implications that urgently need to be addressed.
Food waste is a global problem that is gathering additional attention, as is seen with various initiatives launched here in Singapore, such as the 3R fund launched by the National Environment Agency (NEA) and the Water-Waste-Food Virtual Market Entry Program hosted by the Nordic Innovation House (Singapore). With the topic gathering momentum, this blog piece intends to add additional perspectives to the issue and raise some of the possible business or investment opportunities in the sector.
A problem to chew on?
The economic losses associated with food loss and waste is worth approximately US$940bn according to 2012 data. Such figures are a cause for concern, given that food waste is interlinked with some of the greatest global challenges ranging from climate change and environmental degradation to hunger and gender equality.
Moreover, the impacts of food waste may extend beyond land; agricultural run-off such as fertilizers pollute waterways and ultimately end up in our oceans. Based on the World Bank’s data on global fertilizer consumption, we estimate that approximately 1.92Mn tons of fertilizers are used to produce food that goes to waste.
Food loss vs. food waste in the value chain
What exactly constitutes food loss and waste? The FAO defines food loss as a decrease in the quantity or quality of food in the ‘upstream’ segments of the value chain before the final product stage. On the other hand, food waste refers to food at the ‘downstream’ segments of the value chain up to a final (and edible) product but still gets discarded and not consumed. This distinction is useful for analyzing the food value chain as different enterprises address different segments of the value chain. The following figure illustrates the stages in the food loss and waste value chain, as well as the key stakeholders involved.
In developing countries, which includes most of Southeast Asia, the main issue lies with upstream food loss, i.e., the post-harvesting or processing stages. This is usually due to technical factors such as poor storage infrastructure or a lack of access to capital, technology and refrigeration that results in food spoilage and deterioration. Consequently, improving cold chain management to mitigate loss of easily perishable foods (e.g., seafood and fruits) at the production and storage/handling stages is crucial especially in exporting countries.
In contrast, industrialized countries such as China, South Korea and Japan see more downstream food waste, i.e., retail and consumption levels associated with operational practices and consumer behavior. For instance, due to consumer behaviors such as preferences for stuffed shelves or more visually-pleasing produce, managerial decisions in stores and supermarkets often trump concern for losses, which results in overstocking and food filtering (e.g. removing ‘ugly foods’) practices. Other waste streams include surplus food preparations by buffet restaurants, as well as excessive purchasing and forgetting of leftovers by household consumers. Although food loss tonnage is significant at upstream segments of the value chain, consumer food waste downstream has higher economic value and more intensive carbon footprints.
The business incentive for the food loss and waste market
The scale of the issue and the diverse sources and drivers across the value chain present a huge opportunity for businesses and investors to address inefficiencies and gaps in this sector. By 2030, food loss and waste reduction efforts will have a market potential worth US$155-405 billion. In particular, the Asia pacific food waste management market size is expected to grow at a CAGR of 7% from 2020 to 2025 according to Market Data Forecast.
Recognizing the value of this market, various companies and solutions are attempting to capture a slice of the pie. Such innovations often try to (i) prevent, (ii) recover, or (iii) recycle food waste (and loss), out of which preventing food loss or waste in the first place before it occurs often has the deepest level of impact.
Solutions for reducing food waste
Mana’s landscape snapshot of the existing and emerging enterprises found that waste prevention solutions tend to be more focused on deep technology solutions such as Artificial Intelligence, Internet of Things or blockchain. In comparison, recovery or recycling efforts are usually more capital intensive and require large investment ticket sizes. Hence, some investors may find waste prevention businesses that are more service- or software-oriented to be of interest given that they are asset-light.
The economic, environmental, and social motivations for tackling global food loss and waste are clear. Ultimately, this issue serves as a symbolic problem that is linked to a host of issues; all of which need to be solved given their global scale and implications. As our research has shown, we believe that there are a number of areas – all along the value chain – where investments both possible and instrumental in driving change, towards making a positive impact to help solve the issue of food waste.
Please feel free to contact Mana Impact if you would like to learn more about the food loss and waste topic and how it relates to impact investment in Southeast Asia.
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