Retail’s role in eliminating Global Food Waste
An estimated one third of food produced for human consumption goes to waste; and you might be surprised by the amount of carbon emissions this waste emits. Tesco, a British multinational grocer, is leading the retail industry in an attempt to eliminate food waste.
It is generally undisputed that greenhouse gases are emitted during food production (e.g., using machinery to harvest grains and vegetables, and methane emissions from raising livestock). Furthermore, carbon-emitting resources are put to use in order to process, package, transport and market these foods. What too often gets brushed over, though, is the impact on the environment from the foods that go unconsumed.
An estimated one third of food produced across the world for human consumption is wasted. Not only does this squander the resources put to use producing this food, but also food waste generates and emits even more greenhouse gases, in the form of methane, when placed in dumps [1]. If global food waste were a country, it’s carbon footprint would be the third largest, after China and the United States [2].
Image Source: [2]
In the developing world, much of food waste is attributed to loss of food that takes place during the production phase. However, in the developed world, innovations have helped get the majority of produced food to the retailer level. It’s at this point that things go south. Grocers, out of fear of running out of inventory, often over-order and consequently dump perfectly good food when shelf space runs out. Mis-shapen fruits and vegetables are discarded for more beautiful versions. And “best by” dates are misinterpreted as actual dates of expiration. When added up, American food retailers typically see annual in-store losses of 43 billion pounds of food [1]. Above and beyond moral, ethical or personal reasons that may inspire the leadership team of a retailer to combat the food waste problem, better management of food supply presents a meaningful opportunity for retailers to improve their bottom lines. In fact, in an analysis of 700 companies spanning manufacturing, retail, hospitality and food service, half of them showed a $14 return on every $1 invested in food waste reduction [4].
Tesco, a British multinational grocer, has been an industry leader in the fight against food waste. Since 2009, the organization has been making adjustments to its own operations as a means of zero-ing out the amount of food sent to landfills. This past September, it launched a Supplier Partnership initiative to encourage similar practices earlier along the food chain. These steps include:
Short term:
- Making use of produce with visual imperfections via the launch of the ‘Perfectly Imperfect’ brand of fruits and vegetables, as well as using produce with visual imperfections for store-branded pre-packaged/prepared foods (e.g., mashed potatoes)[3].
- Enabling suppliers to redistribute food that would otherwise be wasted to donation centers [3].
Mid-to-long term:
- Partnership agreements with suppliers committing them to halve their own food waste by 2030 [3].
- Managing surges in crop availability by selling in bulk and at a discount [3].
- Investments in forecasting and ordering systems to better manage supply [3].
- Working more closely with farmers to understand how food order specifications may or may not impact food loss on the farm itself [3].
A core KPI of Tesco’s initiative is in its ability to go viral. The United Nation’s has set a Sustainable Development Target of halving per capita food waste at both the retailer and consumer level by 2030 [4]. Accomplishing such a target is contingent on the commitment of all major retailers and their suppliers to demonstrate an ability to reduce waste. Tesco’s transparency has deservedly been applauded by the UN and key opinion leaders in this space, but a core hurdle will be in convincing more businesses to follow suit. To do so, I believe more efforts need to be made to ensure the case to diminish food waste appeals not only to the ethos (ethics) and pathos (emotions) of management teams, but also to their logos (logic). The economic benefits of minimizing waste are increasingly being measured and should be made more clear, and concrete action plans should be publicized to reduce barriers to comply. It must be made easier for the worlds’ retailers to “do well by doing good.”
Undoubtedly, more hurdles lie in the way of compliance by retailers and their suppliers. In order to make the UN’s goal viable, a culture shift needs to take place on the consumer side. Until consumers take “best by” dates less literally and shift their expectations as to the color, shape and size of produce, it will be a challenge to convince retailers to adapt some of the practices that can help disable food waste. What else lies in the way of the UN’s Sustainability Development Target? How, as HBS graduates and future leaders, can we better educate consumers and create a culture that discourages waste at every level of the food chain?
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[1] Elizabeth Royte, “One-Third of Food is Lost or Wasted: What Can Be Done,” National Geographic, October 13, 2014. [https://news.nationalgeographic.com/news/2014/10/141013-food-waste-national-security-environment-science-ngfood/] accessed November 2017.
[2] Food and Agriculture Organization of the United Nations, “Food wastage footprint & Climate Change” (PDF File), downloaded from FAO website [http://www.fao.org/fileadmin/templates/nr/sustainability_pathways/docs/FWF_and_climate_change.pdf] accessed November 2017.
[3] Tesco, “Little Helps Plan” https://www.tescoplc.com/little-helps-plan/products-food-waste/suppliers/, accessed November 2017
[4] Katy Askew, “Tesco spearheads food waste push,” FoodNavigator.com, September 20, 2017 [https://www.foodnavigator.com/Article/2017/09/21/Tesco-spearheads-food-waste-push#] accessed November 2017.
Tesco’s efforts at reducing waste in its own stores and supply chain is admirable. However, beyond efforts to reduce the waste of its suppliers and its own purchased items, Tesco should work to educate others about the current wastefulness of the food supply chain. Given the company’s scale and purchasing power, it likely has significant power to influence other decision makers and players in the industry, including other suppliers, competitors, and consumers. Tesco should begin by targeting consumers with messaging about waste. Doing so would not only reduce waste, benefiting the environment, but also may help drive sales of items that otherwise go unpurchased or expand sales of certain categories. Further, as this proves to be good business, competitors would likely follow. As an example, frozen food is a category that has been facing declines in recent years in part due to its perception as a less healthy alternative to fresh food. However, not only is frozen food frequently healthier to fresh due to the optimal harvesting and freezing time that locks in nutrients, it also typically results in less waste. The ability to store frozen vegetables for an extensive period of time without worrying about spoilage results in less wasted food. Promoting this category would serve the dual purpose of driving sales of a lackluster category and reducing waste in consumers’ homes.
In addition, appealing to consumers’ wallets with better pricing on “less beautiful” produce or food that has passed its “best by” date may be a way to overcome the initial consumer hesitation to purchase these historically unappealing products. Sales and promotions can serve as a first step in the education process, in the hopes that consumers will ultimately understand the importance of these purchases for eliminating waste.
As future leaders, we can start by examining our own purchasing and consumption behaviors and evaluating where there is room for improvement. For example, I sometimes purchase too much produce with the optimistic view that I will cook or consume all of it. However, reality strikes and I end up throwing away spoiled goods. If I can be better about planning my shopping and scheduling my individual behavior can have a positive impact on the environment.
I was aware that food waste is a very relevant topic touching different areas. However, I had never thought about food waste’s impact on climate change. So I read your essay with interest and I learned a lot from it.
I completely agree with you that the potential economic benefits for Tesco, and other retailers, from reducing food waste are enormous. Theoretically, suppliers could reduce their costs, retailers earn same or better margins, while offering clients better prices. However, many suppliers would be incentivized to hide food waste numbers or reluctant to invest in better technology. This is a huge barrier to overcome. Retailers must be aware that reducing food waste will probably mean to increase their control over the supply chain to drive change.
Tesco also faces a conflict of interest in its mission to reduce food waste. They are determined to reduce food waste in their food supply chain but at the same time they have to sell more products to consumers. As a result, they might find themselves fighting for food waste reduction upstream in their value chain and encouraging consumption, and therefore food waste, downstream when selling to customers. Tesco must be aware of this potential conflict of interest and build a consistent strategy throughout its entire value chain.
Tesco is leading the charge in reducing food waste. As the climate changes and food prices rice, customers will flock to lower cost retailers. If Tesco is successful in reducing food waste, and in turn its costs, it can gain a competitive advantage which can make it a market leader. Tesco should view its efforts to reduce waste as an investment into its future.
The biggest challenge facing Tesco and the UN is changing consumers’ preferences. However, there are ways Tesco can incentivize its customers to change their purchasing behavior without changing their views. Most food shoppers purchase the same list of groceries on a regular basis. If Tesco could access this customer data, along with expected purchase dates, it could manage its inventory more efficiently. One such way Tesco could do this is through a mobile app or online platform. Customers could input the items they purchase on a regular basis and choose a day for pick up on a weekly/bi-weekly basis. This method is letting the customer predict his/hers own demand. This would allow Tesco to stock less inventory as it would have better visibility over into product demand. This system could be implemented through multiple methods. One such method would be for customers to pay for groceries online and then have them be ready for pick-up at the store. With this kind of system customers would be able to add additional items to their list up to the day of the pick-up, however, these additional items would not be offered at a discount. Alternatively, Tesco could implement this by having customers come into store, do their own shopping, and at check out provide a bar code which would allow them to receive the items they programmed into the system at a lower price. In this system, customers would purchase their groceries at check-out. This approach disrupts the current grocery shopping experience less, but poses some risks around customers who use the online/mobile system but do not complete the purchase in person.
A great article and extremely important topic! Given that methane is almost 100x as potent a greenhouse gas as carbon dioxide (despite a shorter lifespan), there is a huge potential to reduce greenhouse gas emissions by eliminating food waste.
Your question about how industry leaders can educate consumers on reducing food waste makes me believe that there newer food delivery services like Amazon Fresh offer a great chance to have this exact impact. Deliveries (or in-store pick ups) could come with pamphlets on how best to reduce food waste by offering advice on ways to store and consume the contents. These pamphlets could potentially include descriptions on what the “best buy” date on each item actually means. Additionally, services could offer discount on “perfectly imperfect” foods and have consumers choose to have those delivered (separating the time of decision from the time of interaction with the weird looking produce). I’m not sure if Tesco is already engaged in delivery activities, but there seems to be plenty of room to grow in that market!
This is a really interesting topic, and your essay was very comprehensive in breaking down the problem. One other potential solution that comes to mind in terms of being able to create more efficient supply delivery, is perhaps a food-sharing app. Similar to ride sharing apps (uber pool for example) is there a way that groups or communities can order food in advance together and buy in bulk in order to create a smoother demand curve? This could also aid towards lowering consumer food waste. Part of the value of meal prep services is that you are only receiving the exact amount of an ingredient that you will need to make a meal, so you don’t buy a head of broccoli and end up throwing away the half you didn’t use for dinner that night. If you can create a group meal/grocery planning process then you can divvy up the exact produce needed for each person in the group.
The issue of food waste seems to be a negative consequence of an otherwise excellent trend – food is getting cheaper. You make a great point about “best by” labels and the unappealing (but otherwise irrelevant) appearance of produce contributing to the issue of food waste in the most developed nations. I also find it ironic that we as a population can waste so much food but still have 815 million people suffering from hunger (11% of the US population (http://www.who.int/mediacentre/news/releases/2017/world-hunger-report/en/). There is clearly a disconnect and inefficiency in the global system of food supply and demand.
The idea of selling extra large proportions to help alleviate the issue of oversupply could help, but ultimately it may just shift the issue of food waste from the retailer to the consumer’s house. Instead, I’m afraid we will continue to see food waste in developing nations until heavy handed regulation comes into play like we recently saw in France (https://www.theguardian.com/world/2016/feb/04/french-law-forbids-food-waste-by-supermarkets). French supermarkets are banned from throwing away unsold food.
When I was in high school, one of my part-time was working in a school cafeteria managing the buffet line. I had to trash a huge amount of food every day. Rather than being dumped, the food should be donated to people who actually need. I wish the school had a better way of dealing with these food waste. It is very delighting to learn that Tesco is working on the problem.
I was shocked to know that ‘If global food waste were a country, its carbon footprint would be the third largest’. It was a good start for the United Nations to set a Sustainable Development target to reduce food waste but without more incentives or enforcement, I do not think that it will generate enough impacts. One way for the UN to overcome this issue is to work with a legal unit of each country to implement some laws which help prevent food waste; for example, UN can make sure that expiration date has to be clearly presented on all food packaging whether there is a ‘best buy’ date or not.
There is a startup in California which is working on a product to prevent food spoilage which I think Tesco should partner with. Apeel invented an edible extract which producers and retailers can put on fruits or vegetables to dramatically slow the rate of spoilage. The extract extends the fresh products’ shelf life by preventing the moisture to leave them and protecting them from oxygen exposure. I think you will find this company interesting. Here is the link in case you want to learn more about this potential solution: http://apeelsciences.com/edipeel.html.
Excellent, timely topic! While I was aware of the tragedy of wasted food in a world where hunger is still upsettingly common, I never considered the pure environmental damage that this waste additionally brings with it. While the subject matter hits on an emotional level, I agree with your assessment that a true business solution will need to revolve on more than just gut-level appeal, both for management and for customers. Fortunately, this is one of those somewhat-rare situations where the best thing for the planet happens to also be the best thing for the bottom line. I think there is still much room to incorporate more advanced analytics to assess shopper patterns and to enable better predictive algorithms to limit over-purchasing from suppliers; between customer loyalty programs to track individual shoppers, and the extensive data supermarkets are able go generate every day on a moment-to-moment basis, there would seem to be ample opportunity to limit the need to overpurchase. The supermarket could also double down on its credo by launching a more all-inclusive publicity campaign, which would bring both goodwill to the company for its efforts, and serve to educate its customers on food waste and sell-by dates and the like. Additionally, seeing as some food is inevitably going to be discarded even in an optimal operation, the company could pursue mitigation strategies to avoid landfills, such as commercial composting efforts, or methane capture for energy production.
Wow! This is really great. Honestly, I think consumers need to become more comfortable with “ugly food” that is perfectly delicious but not beautiful. I think that consumers need to demand this type of produce in supermarkets to create more widespread adoption. Perhaps including nutritious recipes in grocery stores that highlight food quality rather than food appearance can go a long ways to improving consumer adoption.