Fighting climate change by investing in food waste reduction
Climate change has already impacted the way we live, how we do business, and more. Fighting it is an existential imperative – and investing in food waste reduction solutions is a core approach for doing so.
Growing, cooling, processing, transporting, storing, cooking, and ultimately disposing of food all have an enormous GHG footprint, regardless of whether the food is actually eaten. Wasted food is responsible for 8% of global greenhouse gas emissions (GHGs) 1 – in fact, the amount of GHG emissions caused by food loss and waste ranks just behind the amount that comes from China and the United States, the two top GHG-emitting countries in the world.
Major Drivers of GHG Emissions. Image Credit: ReFED
It’s not surprising then that reducing food waste and loss is one of the top climate solutions analyzed in Project Drawdown’s 2020 Drawdown Review. 2 Food waste reduction curbs global food demand, which decreases farming inputs, land use, and the fossil fuel emissions associated with production. Beyond just mitigation, the Intergovernmental Panel on Climate Change has identified reducing food loss and waste as one of the few solutions that also can improve adaptation to climate change – specifically helping with food shortages expected to increase from natural disasters, droughts, and other climate phenomena. 3
According to new research from ReFED, a national nonprofit dedicated to reducing food loss and waste across the food system, an enormous 35% of all food in the United States went unsold or uneaten in 2019. That’s $408 billion worth of food – roughly 2% of U.S. GDP – with a greenhouse gas footprint equivalent to 4% of total U.S. GHG emissions. Most of this surplus food went straight to landfill, incineration, or down the drain, or was simply left in the fields to rot.
And it’s not just the climate. Wasted food means other wasted resources – food that is produced and never eaten consumes 14% of all freshwater and 18% of cropland, plus it’s the number one contributor to landfill volume in the U.S. No matter how sustainably we’re growing our food, it’s a terrible use of resources if it’s not eaten.
Wasted food means other wasted resources. Image Credit: ReFED
The Good News is that Reducing Food Waste is Entirely Possible
In fact, we already know key steps that will substantially reduce food waste. ReFED has developed the Roadmap to 2030: Reducing U.S. Food Waste by 50%, which outlines seven key action areas to help guide the food system’s waste reduction efforts. We’ve also launched the ReFED Insights Engine, which features extensive economic analyses and cost-benefit modeling for more than 40 prevention, rescue, and recycling solutions that can be implemented right now – many of which have a strong potential for investment returns – along with a granular analysis of food waste across the U.S. by state, sector, cause, and impact; and a directory of solution providers that can collaborate on a food waste reduction initiative. Forward-thinking food businesses, innovators, government agencies, funders, and others are already making efforts to address this challenge – but a massive acceleration is needed to achieve national and international goals to reduce food waste by 50% by the year 2030.
Seven key action areas to help guide the food system’s waste reduction efforts. Image Credit: ReFED
An Opportunity for Action
Funding opportunities in the food waste sector are unique in meeting the goals of impact investors - providing both a social and financial return. ReFED estimates that for an annual investment of $14 billion over the next ten years, 45 million tons of food waste can be diverted each year. That investment would result in a five-to-one return of $73 billion in annual net economic benefit. Plus, every year, it would reduce greenhouse gas emissions by 75 million metric tons, save 4 trillion gallons of water, and recover the equivalent of 4 billion meals for those in need. Over ten years, it would create 51,000 jobs – and achieve the nation's 2030 reduction goal.
The impact of investing in food waste reduction. Image Credit: ReFED
With ever-increasing funding round sizes, the first – of possibly many – food waste unicorns (Apeel Sciences), and growing recognition of the significant profit-boosting potential for food companies in a tight margin business, impact investors have an important role to play in scaling and establishing food waste as an investment category. New market-based innovations are continuing to emerge with no signs of slowing down, and several early stage food waste solution providers are beginning to become household names, challenging existing later stage and legacy brands and services.
Breakdown of investment by types of capital. Image Credit: ReFED
Impact investors and capital providers of all kinds can play a role in developing and scaling these food waste initiatives in a number of ways:
Acting as catalytic, risk-taking capital ahead of more traditional investors, especially in the earlier stages of product development for solutions such as Imperfect and Surplus Produce Lines;
In cases where there is a perception that low-price solutions (i.e., Assisted Distressed Sales) mean low-margins, impact investors can act as bridge financing as the model proves itself out;
Where solutions present operational risks (i.e., Enhanced Demand Planning), particularly for smaller organizations, impact investors may provide an additional cushion of financial support to implement and/or pilot;
Covering the upfront or infrastructure costs necessary for food rescue (i.e., build-out of vital cold storage infrastructure and transportation for food rescue and donation); and
Bridging gaps in financing organics recycling initiatives and projects, particularly for more regional operations.
Based on our Insights Engine analysis, these are the top 10 solutions that businesses, investors, and philanthropists can explore based on their climate impact.
Top Ten Solutions | GHG Emissions Avoided in MTCO2e. Image Credit: ReFED
To explore specific opportunities, visit ReFED’s Solution Provider Directory, a living database of over 700 for-profit and nonprofit organizations that are tackling this issue, many of which are looking for funding.
