By Corporate Governance and Responsible Investment Team, RBC GAM
Globally, there is growing consensus that further action is required to address food loss and waste. Approximately US$1 trillion of food is either lost or wasted annually – an amount that accounts for nearly one-third of the world’s food. According to the UN Food and Agriculture Organization (FAO), ending food waste would preserve enough food to feed two billion people. That’s more than twice the number of undernourished people in the world.
It’s more than leftovers
When food is wasted, so are all the energy and resources that went into producing it. This includes processing, packaging, cooling, storing, and transporting costs. Reducing food waste is thus one of the most important things we can do to reverse global warming.
Research conducted by Project Drawdown ranked cutting down on food waste third on its list of solutions to climate change. Cutting back food waste represents one of the greatest opportunities for individuals, companies, and communities to help reverse global warming. It also has the potential to feed more people, increase economic benefits, and preserve threatened ecosystems.
The negative environmental effects are just part of the problem. Consumers are also becoming increasingly concerned about companies’ efforts to solve the global problem of food waste. A company’s mismanagement of this issue could cause reputational damage. Both of these issues could ultimately translate into financial losses for companies.
Towards Sustainable Development Goals (SDGs)
The Sustainability Accounting Standards Board cites food waste as a material issue impacting food retailers’ and distributors’ performance. The Board recommends that companies do the following:
- Report on the strategies they have in place to manage the issue
- Show how they address environmental and social factors associated with food waste.
In setting out its SDGs, the United Nations stated: “The 2030 Agenda for Sustainable Development, adopted by all United Nations Member States in 2015, provides a shared blueprint for peace and prosperity for people and the planet, now and into the future. At its heart are the 17 Sustainable Development Goals (SDGs), which are an urgent call for action by all countries – developed and developing – in a global partnership.”
The 12th SDG seeks to “ensure sustainable consumption and production patterns.” Under this goal, SDG 12.3 calls for halving per capita global food waste at the retail and consumer levels and reducing food losses, including post-harvest losses, along supply chains by 2030.
Here’s how the world’s 50 largest food companies have responded:
- Over two thirds have set targets in line with SDG 12.3
- Over 40 percent are measuring their food loss and waste
- One third are pursuing actions at scale to reduce waste in their own operations
Reducing food loss and waste is an important strategy to help meet the UN SDGs by 2030, contribute to the Paris Agreement on climate change, and sustainably feed the planet by 2050.
Shareholders hungry for additional disclosure
Several U.S. grocery and supermarket chains, including Ahold Delhaize, Kroger, Sprout Farmers Market, Walmart, Wegmans, and Weis Markets are part of the 2030 Champions, a coalition launched by the United States Department of Agriculture (USDA) and the Environmental Protection Agency (EPA) that comprises U.S. businesses committed to meeting a national food loss and waste reduction target of 50 percent by 2030.
Meanwhile, in Canada, eight leading companies have committed to take measurable action to prevent and reduce food waste in their own operations by 50 percent by 2025 relative to a 2016 baseline. In the UK, more than 100 signatories–including all major UK food retailers and food service companies – have committed to work together in order to reduce the environmental impact of food waste and loss as part of the Courtauld 2025 agreement. Additionally, to support achievement of the SDG 12.3 global target and maximize the contribution of all actors in the Eurozone, the EU Platform on Food Losses and Food Waste was established in 2016, bringing together EU institutions, experts from the EU countries and relevant stakeholders.
Food waste is a product of inefficiencies throughout the food supply chain. There are ways for everyone, from producers to distributors and consumers, to help mitigate the problem. Food retailers and distributors in particular are in a unique position to significantly address the problem. For example, they can educate consumers on the impacts of food waste, and can also sell cosmetically defective food at a discount.
Alternatively, some firms in Japan are exploring the use of technology and data to reduce food waste produced at source. For instance, knowing that customer demand and product sales are impacted by temperature forecasts, one Japanese company, Sagamiya Foods, uses weather data to help determine the amount of food it should produce to meet forecasted demand. Deployed successfully, this approach would reduce surplus food being produced at the top of the supply chain, and also save companies money. For Sagamiya Foods, the company expects that this new approach will save them 10 million yen in annual costs.
All these actions can add up over time. The clock is ticking around the globe in the countdown to the United Nations’ 2030 goals.
In 2018, Royal Caribbean Cruises, the second-largest cruise company in the world, agreed to make its food waste management and reduction strategies more public after a shareholder proposal was filed (and later withdrawn by the proponent) at the company’s annual meeting. In 2019, RBC Global Asset Management (RBC GAM) encountered two shareholder proposals asking companies to report on management of food waste. RBC GAM evaluates such proposals on a case- by-case basis, and will generally support proposals related to enhanced disclosure in an area that represents a real risk or opportunity for the company. In the case of the two proposals RBC GAM saw in 2019, it was determined that both warranted support as they were calling for additional disclosure on a material risk faced by RBC GAM’s investee companies.