Lucy Acton, Environmental, Social and Governance Analyst, HSBC
Waste not, want not
Around 14 per cent of the food produced in the world is wasted before it even gets to market. That’s around USD400 billion lost each year – a vast amount.
Retailers can protect their reputation by acting to cut that number now. And with investors and regulators paying ever-closer attention, we think there’s no time to lose.
The inefficiencies alone give retailers a reason to act, with waste currently costing some retailers the equivalent of 1 to 2 per cent of sales. But the wider environmental and social impact is also significant.
Farming is resource-intensive and contributes towards climate change. Food waste could account for as much as 8 per cent of man-made greenhouse-gas emissions, according to WWF. Intensive agricultural practices also lead to loss of ecological services and biodiversity.
Meanwhile, COVID-19 has threatened the food and nutritional security of an additional 132 million people worldwide, according to the United Nations Food and Agriculture Organization (FAO). This has thrown an extra spotlight on the food supply chain and led policymakers to scrutinise further where food is wasted, and how this can be minimised.
The FAO recently named 29 September the International Day of Awareness of Food Loss and Waste, calling on companies and policymakers to tackle the issue. This was just the latest sign of the topic’s rising profile.
Leaders at a regional and national level are already beginning to take action. The European Union’s Green Deal explains how addressing food waste and security will be important for tackling climate and biodiversity challenges. Investors, too, are increasingly incorporating food waste into the questions they put to major companies.
Retailers face different challenges in different parts of the world. Overall food waste per person in North America and Oceania is more than double levels in South and Southeast Asia.
Developed markets tend to see most waste generated at the retail and consumer stages of the supply chain. Emerging markets mostly suffer waste at the production and processing stages. This is largely due to poor storage, cooling and transportation infrastructure, in our view.
But there are signs that companies are taking the issue seriously. There are increasing references to food waste in the news, as well as updates published by food retailers. The Consumer Goods Council of South Africa has launched a voluntary agreement to combat food loss and waste in line with the UN Sustainable Development Goals, signed by major domestic retailers and manufacturers. And one large UK retailer recently called for increased efforts from the sector, particularly with regards to publication of food waste data.
We think improved information from companies and countries is vital to ensure initiatives to cut waste are robust and deliver the improvements that policymakers, investors and consumers want to see.
- Disclosure and disclaimer
The following analyst(s), economist(s), or strategist(s) who is(are) primarily responsible for this report, including any analyst(s) whose name(s) appear(s) as author of an individual section or sections of the report and any analyst(s) named as the covering analyst(s) of a subsidiary company in a sum-of-the-parts valuation certifies(y) that the opinion(s) on the subject security(ies) or issuer(s), any views or forecasts expressed in the section(s) of which such individual(s) is(are) named as author(s), and any other views or forecasts expressed herein, including any views expressed on the back page of the research report, accurately reflect their personal view(s) and that no part of their compensation was, is or will be directly or indirectly related to the specific recommendation(s) or views contained in this research report: Lucy Acton, CFA
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