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Why Supply Chains Should Put Curbing Global Food Waste at the Forefront

10/01/2018 By

More than 2 billion tons of food worth $1.5 trillion could be wasted in 2030, according to the Boston Consulting Group. It’s not an unrealistic estimate considering the 1.6 billion tons worth $1.2 trillion lost just three years ago.

Food waste is a concept so vast and systemic that one must go beyond the individual impact and look toward how entire companies involved in the process – from production to consumption – can actively work in a way that helps solve a global crisis while attaining tangible business benefits.

That’s the case BCG makes in its recent study on food loss and waste. Collaborating with nonprofits Food Nation and State of Green, BCG pinpoints five main factors that supply chain companies can improve on to reduce food waste: awareness, infrastructure, efficiency, collaboration and policy environment.

The study recommends several initiatives that companies can apply depending on their involvement in food production, handling and storage, processing and packaging, distribution and retail, and consumption. As the graph below shows, the initiatives can overlap and apply to multiple stages.

The lack of awareness on the extent of food loss or waste is critical to the issue, according to BCG. The study recommends global supply chains use their influence on farmers and consumers to promote recycling through updated product packaging and emphasizing the proper repurposing of waste. Working toward increased awareness can reduce food waste by $260 billion annually, according to the study.

Depending on how developed markets are, supply chain companies can use different initiatives to improve infrastructure to help eliminate food waste by about $150 billion annually. Companies in more developed markets can invest in expanding cold chain to keep food nutrient-rich from production to consumption. Organizations in less developed markets can apply technologies to smaller farming operations that larger commercial operations tend to use. An example the study gives is low-cost, solar-powered refrigeration units that help farmers in South Asia and East Africa store food to avoid spoilage and allow them to sell their products when prices are more favorable.

Supply chain companies can both reduce food spoilage and operational costs by increasing efficiency, one of the mains methods being through sourcing localization, according to the study. Sourcing local ingredients leads to less time transporting food, reducing the risk of spoilage and food waste. Companies can also increase efficiency by looking to digital tools that allow better tracking of food waste, although KPIs are usually used to track equipment availability and manufacturing line speed rather than food loss. But widespread adoption of such processes can reduce food waste by $120 billion annually, according to the study.

Improved collaboration between producers and suppliers is vital to reducing food waste, BCG says. More accurate models for supply and demand forecasting can be created via collaboration among producers, processors and government agencies. Buyers can also set prices in contracts that reduce incentives for farmers to produce more food than necessary. An example the study gives is how Tesco guarantees purchasing at least 80 percent of the orders it places with agricultural suppliers, reducing the need for farmers to estimate how much to produce. Increased collaboration could help offset the problem by $60 billion annually, BCG suggests.

Little can be done in the industry to reduce food waste without proper policy and regulation changes, which companies should publicly advocate for, the study said. Retailers should recommend adopting industry standards for items such as date labels, which can confuse consumers and result in food waste if unclear.

Reducing food waste is both an investment of money and time for companies; so why do it? Helping the world’s societal issues isn’t enough to keep a business going. But according to BCG, working to reduce food waste can allow businesses to reap significant rewards. Recent research by BCG found that companies that lead in reducing their environmental footprint usually boast margins that are more than 3.3 percentage points higher than companies who don’t push for change. Raising awareness of food waste can also grow a company’s brand and improve talent retention.

Even if a business has decided to invest in pushing to reduce food waste, it can be daunting to figure out where exactly to begin. The best way to start is to evaluate which initiatives are the most relevant to an organization, depending on where the company falls in a food product’s path to consumption. Once a business knows where to start, it’s time to integrate the collaboration factor and find effective partnerships that can progress the mission to reduce waste. Once partnerships are formed, it’s vital for companies to utilize metrics to track the impact in reducing food waste so the data can be used to gain support from external groups.

Check out the full report here