In places where supply and demand don't match up, there may be a business opportunity. If demand for a product outpaces supply, a savvy entrepreneur can ramp up production, create a new product line or simply raise prices. If supply exists but isn't efficiently being matched with demand, there may be a case for better distribution.
In the case of food, on the one hand, one in nine people globally are undernourished. On the other, more than a billion tons of the food that gets produced each year is lost or wasted. This seems like an area where human ingenuity, using technological innovation, could connect the dots and make money in the process.
There are obvious complexities. But a recent study highlights cases where the return on investment from interventions to limit food waste is quite high. The study, called "The Business Case for Reducing Food Loss and Waste," analyzes the challenges and opportunities inherent in this colossal global mismatch of supply and demand. The research was commissioned by a group called Champions 12.3, named after UN Sustainable Development Goal 12.3, which reads: "by 2030 halve per capita global food waste at the retail and consumer level, and reduce food losses along production and supply chains including post-harvest losses."
The study analyzed some available country and city data on food loss and waste, as well as nearly 1,200 business sites across 17 countries, and more than 700 companies in various food businesses. It looked at projects and studied business cases, finding a wide variety of return on investment figures, most extremely high. For example, in one project undertaken by the UK, every £1 invested to help reduce household food waste brought about savings of £250.
According to the study, roughly $940 billion in economic value is lost every year from food loss and waste, while in the US, the average family of four wastes about $1,500 worth of food annually.
Food "loss" is defined as unintended waste, such as food that rots in inadequately refrigerated storage before it can be eaten, or food that can't make it to the market because of poor infrastructure. Food "waste" is more a result of someone's intentional choice, such as expired food or food that is cooked but not eaten.
Here is one example from the study of how investing to reduce food loss and waste can pay off:
"A food services company operating in workplace restaurants across 23 sites in a western European country quantified its food loss and waste, finding hotspots due to overproduction, out-of-date food, and uneaten meals by customers. Reduction efforts included using more semi-prepared food, improving meal forecasting, training staff, and engaging consumers. Across these sites, the benefit-cost ratio of the actions implemented was nearly 25:1."
According to the study, when companies first embark on a food efficiency project such as the one in the example, the savings are normally very high. Return on investment can be lower if the "low hanging fruit" has already been dealt with. The researchers also noted that reducing waste that occurs close to the end consumer often comes with a high return on investment.
The researchers came to conclusions which they outline as a "Call to Action." The first step is to set targets; countries, cities, and agribusiness companies should set specific, measurable targets for food waste reduction. The next step is to measure. A helpful tool is the Food Loss and Waste Accounting and Reporting Standard released in 2016. And lastly, implementation plans need to be put in place. The report lists effective actions that could be replicated and expanded. Here are some: infrastructure and technology advancements in developing countries to help farmers get food to market; improvements in packaging and labeling; connecting unsold food to charities; reducing food waste in schools.
Separately from the Champions 12.3 project, the US Environmental Protection Agency also provides information and tools for tackling food waste. The EPA created a hierarchy of preferred food recovery management systems, available on its website. The most preferred action, according to the EPA, is to reduce the volume of surplus food generated. That means adapting supply to meet expected demand for food more precisely. Next on the list is donating excess food to feed hungry people. Third in the hierarchy is diverting food scraps to animal feed, and fourth is sending waste food to industrial uses such as anaerobic digestion machines which turn food into energy. Next is composting, and the very last resort is to dispose of food waste in landfills or incinerators, releasing methane emissions.
On the action front, the EPA offers tips for individuals, communities, schools and other institutions. To promote better food waste management, the EPA also promotes "Food Recovery Challenge" awards, publishing the winners' projects on its website every year.
The most exciting part of the story, as usual, is innovation. Refrigerators are being designed to transmit information about leftovers and create shopping lists. Apps are being created to match restaurant leftovers with food banks. Other apps can improve efficiency of irrigation and agricultural productivity. A recent global food innovation summit in Milan, Italy, whose speaker lineup included former president Barack Obama, showcased such innovations as urban vertical farming and packaging plastics made from coffee, parsley and cinnamon waste. It also emphasized startups and provided opportunities to match them with investors.
With such high return on investment ratios, why wait for a better business opportunity? Start designing the next food waste reduction software, work out the business model so the returns translate into cash, and at the same time save a few starving children. Help households understand how reducing waste saves money; help communities organize to achieve a common goal; generate models we can all use. The Champions 12.3 report also makes the "nonfinancial business case" for food waste reduction, and includes in it ethical and social responsibility. Which makes the business case a win-win-win: for the entrepreneur, for her customers, and for humanity.