Around 33 to 40% of the world’s food is lost or wasted every year. These are the startling findings from research highlighted in a recent McKinsey & Co. report. [1] Food Engineering & Ingredients speaks to Christoph Tappeiner, CEO of VOG Products about food loss and a recent case study of an initiative by the company to minimise post-harvest crop losses.

More than two billion tons of food are lost or wasted every year. About half of this happens upstream: during the harvest, post-harvest handling and storage, and processing stages. Although meat and dairy have a high environmental impact per unit produced, meat accounts for only about 3% of food loss; dairy another 5%. Three other food categories – fruits and vegetables, cereals, and roots and tubers – account for much of the food loss and the associated CO2 emissions and water use. Christoph Tappeiner, CEO of VOG Products explains the difference between food loss and food waste: “The Food and Agriculture Organization of the United Nations defines food loss as ‘the decrease in the quantity or quality of food resulting from decisions and actions by food suppliers in the chain, excluding retail, food service providers and consumers’. Consequently, food waste is referred to ‘the decrease in the quantity or quality of food resulting from decisions and actions by retailers, food services and consumers’. “Besides the wastage of the food itself, food loss also entails environmental costs in the form of loss of land, water, factors of production and labour, and leads to greenhouse gas emissions that contribute to global warming,” he points out. “Losses and waste in fresh, more perishable food categories are particularly serious. Globally, an estimated 22% of fruit and vegetables are lost every year during or immediately after harvest. Much of global food waste therefore occurs at the beginning of the value chain, long before products reach the market,” Tappeiner says.

A societal and environmental priority

Food loss should be seen as a societal and environmental priority because although loss of food itself is bad enough, it is the secondary effects that are alarming. For example, water consumption linked to food loss and waste amounts to approximately 25% of the world’s freshwater supply. Greenhouse-gas emissions from food loss and waste constitute 8% of the global total, or at least four times those of the aviation industry. Food loss should therefore be treated as a societal and environmental priority.

“The good news,” Tappeiner emphasises, “is that food waste is not inevitable. The highest loss of fresh harvested fruit is due to quality losses because, for example, not every apple is suitable for fresh consumption, either because it is too big, or too small, or because it does not have the right colour. But very often it is still an excellent apple that can produce top-quality apple juice. The nutritional and commercial values of such fruit can be preserved by processing activities.”

Anti-waste initiative

These ideas form the basis of an anti-waste initiative implemented by VOG Products in an effort to reduce food loss.

Tappeiner continues: “At VOG Products, we produce healthy, highquality food and beverages for customers in the food and beverage industry, turning fresh apples and other fruits into three processed product categories: beverage compounds, ingredients for baking and confectionery and finished products. “The validity of the anti-waste model adopted by VOG Products is demonstrated by a recent scientific study conducted by Christian Fischer, Professor of Agricultural and Food Economics at the Free University of Bolzano. In the study, titled ‘The apple processing cooperative VOG Products as a role model for minimising post-harvest crop losses – an empirical case study from South Tyrol, Italy’, Prof. Fischer demonstrates how our company significantly contributes to reducing harvest and post-harvest losses in the apple production chain through product processing. While internationally apple wastage averages 20% of the harvest volume, with VOG Products food loss in Italian apples drops to 6-10%, depending on the year. “VOG Products therefore represents a best-practice case that can serve as an international role model for minimizing post-harvest crop losses in the apple supply chain, providing performance improvement suggestions for other players in the food chain.”

Tappeiner adds that one of VOG Products’ key strengths is its ownership structure. “As a producer organisation, we source apples from our members – that is three producer organisations and 17 cooperatives, which in turn are backed by around 6,000 fruit-growing families. This means that we work very closely together within the supply chain. With good organisation and investment in innovation along the supply chain, product losses can be significantly reduced, providing a triple win for producers, consumers and the environment.”

What are scope 3 emissions?

According to the US Environmental Protection Agency, scope 3 emissions are the result of activities from assets not owned or controlled by the reporting organization, but that the organization indirectly affects in its value chain. Scope 3 emissions include all sources not within an organization’s scope 1 and 2 boundary. The scope 3 emissions for one organization are the scope 1 and 2 emissions of another organization. Scope 3 emissions, also referred to as value chain emissions, often represent the majority of an organization’s total greenhouse gas emissions.  Learn more here: https://www.epa.gov/climateleadership/scope-3-inventory-guidance

Ways for manufacturers and retailers to curb food loss

There are specific ways in which manufacturers and retailers can address food loss. According to the McKinsey & Co. report, “Reducing food loss: What grocery retailers and manufacturers can do,” food manufacturers and retailers could reduce food loss by 50 to 70% by working closely with all participants in the value chain. Two-thirds of the food that would otherwise be lost could be redirected to human consumption; the remaining one-third would go to alternative uses, such as bio-based materials or animal feed.

The business rewards would be significant: companies would reap economic and cash flow benefits while simultaneously improving their scope 3 emission footprint. The research shows that retailers could reduce their cost of goods sold (COGS) by 3 to 6%, manufacturers by 5 to 10%. Grocers and manufacturers could capture $80 billion in new market potential by developing new businesses from food that would otherwise be lost. And they could cut CO2 emissions and the associated costs by 4 to 9%. The McKinsey & Co. report also notes that food loss reduction must be treated as a strategic priority and have the buy-in of the C-suite of the company. Food loss reduction won’t be treated as a strategic priority unless it has the sponsorship of the C-suite, the authors emphasise. Indeed, in an informal poll of a dozen industry leaders, two-thirds pointed to weak governance as the biggest roadblock to the implementation of food loss programmes in their companies. One of the most important enablers for significant and sustained change, therefore, is a strong governance model – with cross-functional accountability encompassing procurement, R&D, the supply chain, manufacturing, marketing, and finance; clear responsibilities and objectives; and KPIs at the individual, functional, and enterprise level. Designating an owner for each food loss initiative and aligning on measures of success will help ensure progress, they note.

Seeing food loss as an inefficiency not an inevitability

Stakeholder management, too, is a critical enabler. Suppliers, consumers, and other participants in the value chain can be persuaded to become allies and supporters of loss-reduction efforts rather than inhibitors. Manufacturers and grocers can create and raise awareness of the problem – and its extent – among farmers and suppliers, to help them see food loss as an inefficiency instead of an inevitability.

Public awareness of food loss and waste will influence how retailers and manufacturers act. As the world moves toward a potential food emergency (currently, one in nine people is suffering from hunger) and as public awareness of the issue grows, external stakeholders will become savvier about food loss and, as a result, more demanding. They will compel retailers and manufacturers to act. McKinsey & Co. identified four levers that retailers and food manufacturers can pull in order to address the issue: minimizing loss during production and processing, minimizing loss during transit, selling more of what is produced and structurally preventing loss.

Grocers and food manufacturers can set targets for both their own company and suppliers, and integrate food loss visibility and reduction into incentive structures. Some forward-thinking companies are actively engaging with suppliers to map food loss “hot spots” in the supply chain and to understand their causes. These companies are developing (and providing public access to) an integrated database of suppliers’ performance across locations. Additionally, some best-practice companies are using digital technologies, like blockchain, to make products traceable at every stage along the journey from farm to store.

Christoph Tappeiner, CEO of VOG Products

References

1. McKinsey & Co. Reducing food loss: What grocery retailers and manufacturers can do.
https://www.mckinsey.com/industries/consumer-packaged-goods/our-insights/reducing-food-loss-what-grocery-retailers-and-manufacturers-can-do