Why tackling food waste is a win-win for manufacturers — and 3 ways it's getting done
$218 billion a year. The U.S. spends that on food that is never eaten. That equals to about 1.3% of the nation's GDP and 20% of cropland, fertilizer, fresh water, and landfill volume, according to Eric Kessler, founder of Arabella Advisors and senior managing director of its Good Food Practice, which advises philanthropists and investors on ways to improve the food system.
While a significant portion of food (and money) waste is at the consumer level, the food and beverage supply chain from farm to factory to retailer also generates food waste in a number of areas.
In 2011, the Grocery Manufacturers Association teamed with the Food Marketing Institute and National Restaurant Association to form the Food Waste Reduction Alliance (FWRA), which has since made significant efforts to reduce food waste across the supply chain. While this is a start, manufacturers looking inward at their supply chains can determine innovations that suit their portfolios and business models.
Manufacturers' opportunities to reduce food waste can drive profits, boost shareholders' confidence, and bolster commitments to transparency and sustainability in the eyes of consumers. Food waste is a win-win manufacturers can no longer afford to ignore.
A busy year of industry goals and action
Over the last year, the food and beverage industry and national and international governing bodies have taken steps toward reducing food waste:
- June 2015: Hundreds of leading global food and beverage companies pledged to halve food waste within their operations by 2025, compared to a 2016 baseline.
- September 2015: USDA and EPA set the first national goal to reduce food waste in the U.S. by 50% by 2030.
- November 2015: FWRA releases food waste guide for the industry.
- December 2015: House introduces Food Recovery Act of 2015, meant to tackle food waste.
- May 2016: Senate introduces Food Date Labeling Act, meant to standardize food date labeling language.
- May 2016: GMA's senior director of sustainability Meghan Stasz outlined the industry's efforts for the House Agriculture Committee.
- June 2016: A partnership of global organizations launched the Food Loss and Waste Accounting and Reporting Standard (FLW Standard).
Standardized date labeling
Data from ReFED, a multistakeholder group focused on nationwide food waste solutions, showed that a standard date labeling system could generate an estimated annual benefit of about $1.82 billion, second only to consumer education.
"One business' 'best used before' is another business' 'freshest by,' and those can have totally different definitions (with) no consensus around that," said Kessler. "We’re excited about how all the players in industry and the advocacy and regulatory sides want to get together and make this one simple fix."
Nestle voiced its support for the House and Senate bills last month, and General Mills also expressed support for standardized date labeling, though it didn't mention specific legislation. Changing labels comes at a cost, but when expiration date confusion leads to food waste at the retail and consumer levels, that also means wasted ingredients, resources, and labor expenses for manufacturers.
Stasz emphasized in her testimony before the House last month that "date labeling is not THE solution to the food waste issue," and there is no "silver bullet" for solving the problem.
Still, revisiting date labeling procedures and packaging language could help manufacturers identify ways to better use shelf life technology, on-package real estate, or marketing campaigns to better demonstrate the true shelf life of a product.
Recycle food waste
GMA companies recycled nearly 94% of food waste generated during manufacturing in 2014, Stasz said in her House committee testimony. According to a 2014 report conducted by the FWRA, food and beverage manufacturers recycled 93.4% of food waste in 2013 (94.9% was diverted from landfills). Of that total, 86.8% became animal feed, and the rest became fertilizer, compost, and biofuel.
Recycling can take many forms depending on a manufacturer's portfolio and supply chain.
In another industry example, Nestle operates 22 Nescafe factories in which the company recaptures all coffee grounds and reuses them for renewable energy. Manufacturers can also convert food waste into energy by using anaerobic digesters, though it does require an upfront cost to implement.
But 63% of manufacturers in FWRA's 2014 report also indicated that barriers stood in the way of recycling food waste. These included:
- Insufficient recycling options (70%)
- Transportation constraints (70%)
- Liability concerns (50%)
- Concerns about collection and storage related food safety (50%)
Other barriers included limited availability of recycling facilities, transportation costs associated with long distances, strict internal requirements for food waste handling, and regulations that limit the reuse of certain types of food waste.
While barriers remain, recycling food is one of the most widely practiced methods to reduce waste across the supply chain. In certain cases, the right recycling innovations could also lead to additional revenue streams for a manufacturer.
In 2013, manufacturers donated 106 million pounds of food that was discontinued, mislabeled, bulk, or otherwise safe but unsellable, according to the FWRA report. In 2015, that number jumped to 800 million pounds of food donated to food banks, according to the GMA.
Through its Breakfasts for Better Days program, Kellogg provided more than 1.4 billion servings of food, more than half of which were breakfast, to families in need. That prevented much of these safe, edible foods from ending up in a landfill.
Manufacturers can also donate leftover food to farmers for livestock feed. This sweetens the deal for farmers within the manufacturer's supply chain but can also create additional relationships and revenue streams with farmers outside the manufacturer's existing supplier network.
Concerns also surround donations because of food safety. However, the Good Samaritan Food Donation Act, passed in 1996, protects manufacturers from liability when they donate food to a nonprofit, including removing civil and criminal liability if a product donated in good faith harms the recipient.
Manufacturers can create programs or partner with startups and app developers dedicated to connecting food companies with nonprofit and aid organizations.
Food waste reduction: The ultimate win-win
"Of all of the challenges facing our food system, food waste is one where everybody agrees," said Kessler. "There's nothing contentious about this. There are debates on how best to proceed, how best to get it done, but it's in everybody's interest to reduce food waste."
Food waste is an enormous inefficiency with lost sales and costs of ingredients and resources needed for production, packaging, and delivery, such as water, fuel, and payroll. It's in the best interests of both manufacturers and shareholders to develop food waste reduction strategies sooner than later.
"There's a lot of emotional, environmental, and ecological reasons to do this, but the bottom line is, it's waste," said Kessler. "And how can you run a manufacturing company, whether it's food or something else, with such a huge waste volume on your production line?"