The next time you toss out an overripe banana or search for the “Use By” date on a can that has been in the cupboard for, umm…, a while, think about this: Estimates show that up to one-third of all food produced worldwide is never consumed, and 1.4 billion hectares of land, which represents 28 percent of the world’s agricultural area is used to produce food that is lost or wasted every year.
According to the U.N. Food and Agriculture Organization, over the last few years we have lost ground in terms of progress toward Sustainable Development Goal (SDG) #2, “End hunger, achieve food security and improved nutrition and promote sustainable agriculture.” Conflicts such as Russia’s invasion of Ukraine, droughts, floods, and economic slowdowns and downturns caused by the COVID-19 pandemic are the major causes of this lack of progress.
Not only is food waste a humanitarian issue, it is an economic problem. In The Business Case for Reducing Food Loss and Waste, Champions 12.3 (named for SDG 12.3, which calls for cutting per capita global food waste at the retail and consumer level in half, and reducing food losses along production and supply chains by 2030) reports that for every $1 invested in reducing food waste and loss, companies saved $14 in operating costs. Opportunities for a 1,400% return on investment don’t come along every day.
Improving the Restaurant Industry’s Profitability
To focus on just one aspect of the economic implications of food waste, back in 2014 the Sustainability Accounting Standards Board (now part of the Value Reporting Foundation) found that food waste and loss is a material issue for the restaurant industry. When food is wasted, a lot of other resources are wasted at the same time. Producing food takes water, energy, land, labor, and capital, and that all goes to waste when what would have been edible food ends up in a landfill.
Companies can reduce waste, and therefore reduce costs, by various methods. Food recovery, diverting waste from landfills, reducing packaging, and finding new uses for what was previously treated as scraps all reduce waste handling costs and improve operational efficiency.
In a separate study related to the one mentioned above, Champions 12.3 interviewed industry experts and learned that food waste is not typically measured in running a restaurant. That may be understandable if you are a chef whose sole focus is turning out great food, but it’s a jaw-dropper when looking at a restaurant as a business that needs to deliver an ROI. Even when data about food waste is gathered (for example, by onsite equipment, composting services, or waste haulers), that information is not always communicated back to the restaurant and its food preparers.
In this study, Champions 12.3 followed 114 restaurants across 12 countries that invested no more than $20,000 (often less) in waste reduction and gathered information about their cost savings.
- The average benefit-cost ratio for food waste reduction was 7:1 over a three-year time frame.
- Within the first year of implementing a food waste-reduction program, 76 percent of the restaurants had recouped their investment. Within two years, 89 percent of the sites had done so.
- By reducing food waste, the average restaurant in the study saved more than two cents on every dollar of cost of goods sold. That’s not small potatoes (pun intended) when the average restaurant’s profit margin is only 2%-5%
- There was no clear correlation between benefit-cost ratios and a site’s market segment or geographic location.
The cost associated with this effort consisted of buying smart scales or similar measurement technology and training staff in techniques to reduce waste.
Find new uses to reduce food waste
Restaurants cannot perfectly predict demand for all of the items on the menu; that means either running out of something, which makes customers unhappy, or having extra, which can lead to waste. In the latter case, having a plan to safely repurpose excess food inventory can allow a restaurant to generate revenue from what otherwise would have been wasted. Meat intended for breakfast could become a lunch ingredient. Restaurants could have a “floating” menu slot that features dishes created from unused items from earlier in the week. Previously unused parts of food (vegetable peels, seeds, skins, bones) can be used to make soup stock and other dishes that generate revenue instead of wasting.
The study recommends creating information feedback loops so that the front-of-house and kitchen staff can track the success of food waste-reduction efforts. Restaurant owners should set clear targets for these efforts and assess results. This is Management 101 stuff – excess inventory spoils faster in restaurants than last season’s fashions.
In the food manufacturing industry, significant cost savings and new revenue sources can be realized by creating a more circular system, where food that would have been regarded as waste is made reused and/or turned into other products. Kerry, a global leader in sustainable nutrition with 22,000 employees in 152 locations globally suggests strategies such as:
- Recycling and upcycling to keep food resources within the food supply chain, improving product quality and creating new revenue streams. For example, the zest from orange peels that are “leftover” when producing orange juice can be used as a natural orange flavoring, in the juice or in other products. Whey, a common by-product in certain dairy production processes, can be sold as a dairy protein ingredient. Creative examples include using spent grains from beer brewing in bakery products and nutrition bars.
- Reusing and composting, converting unusable food waste and by-products into fertilizer or compost, which can be used to produce other food products. This lowers costs and reduces the need for artificial fertilizer made from chemicals. Kerry describes how this strategy helped a customer create a more sustainable bone broth using bones from the customer’s chicken processing plant. The bones were then sent to a fertilizer company, which turned them into a garden fertilizer.
The triple bottom line for food
Reducing food waste definitely qualifies for “triple bottom line” status. It is environmentally sound, because using more of the food we already produce means less land and water resources are used in agricultural production. It helps society by allowing the industry to feed more people at a lower cost. Its economic benefits are also clear, for restaurants and for the entire food production ecosystem. As a recent report from the McKinsey Global Institute suggests, biological innovation in agriculture, aquaculture, and food production could produce returns of up to $1.2 trillion over the next 10-20 years. That would increase the value of the global food and agribusiness industry by more than 20%.
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