Guest Posted by Daniel Kriozere (GoingVC Cohort 6)
Food waste is an enormous environmental, social and economic problem. 1.3 billion tons of food per year are wasted globally (roughly a third of all food produced). Food waste is a $940 billion problem that also adds 3.3 billion tons of greenhouse gas emissions into the atmosphere.
The issue at hand has as much to do with the need for innovation but also for regulatory-induced alignment of incentives. Waste bans are a good start to address organic waste, but we ultimately need national organic waste policies to focus on four key areas: financial incentives, infrastructure, education, and enforcement.
So where are the opportunities for investors looking to invest capital into this solution? Below is a walkthrough of companies I believe are at the forefront of change in this industry.
Overview of the Opportunities
From talking with SolarX Works, one of the problems here is the lack of cold chain infrastructure to maximize the quantity of produce that makes it to the market. If more produce can make it to the market without going bad, farmers and supermarkets stand to make more profit, and there are more solutions to address excess waste along the supply chain.
Upcycling has been growing as a trend over the last two years. Companies like Renewal Mill are fighting climate change and global food loss by upcycling the byproducts of manufacturing into premium ingredients and finished products.
Others in this space of enhancing the circular economy via upcycling food have come together to form the Upcycled Food Association. This association is working on a product certification program so that you can have your product certified the way that it would be certified organic or certified non-GMO.
When it comes to selling to consumers, one of the biggest problems is demand forecasting. When supermarkets underestimate their forecast, they leave money on the table, especially when supermarkets already operate on thin margins. However, when there is excess supply, there is waste generated. The key here is to convert potential food waste into limited financial losses via dynamic pricing, like what Wasteless has created. Wasteless is an AI-based tracking solution for grocery stores to offer customers dynamic pricing based on product expiration date, helping retailers optimize markdowns, increasing their profitability.
No matter the innovations and process improvements, there will still be organic waste generated throughout the entire food supply chain – there will always be leftover banana peels and eggshells. This is where companies like Compost Crew come in, to take care of organic waste composting and recycling. Managing organic waste will require a variety of solutions: composting, anaerobic digestion, incineration, and more. Innovations, like Gate 5, will help further this space to turn waste into value.
Future Outlook: Aligning Incentives
So what does the future hold? From a regulatory standpoint, just one month ago, the Consumer Goods Forum launched a CEO-led Coalition on Action on Food Waste to contribute to the effort to reduce food loss in supply chains worldwide.
With the right policies (with economic benefits), there will be incentives for a more circular economy. Policies can decrease the cost of recycling food waste and de-incentivize people from producing waste. New policies should address zoning for new waste management facilities, as well as by restructuring local taxpayer money. Additionally, policies should establish financial incentives for consumers to produce less waste. The full cost of throwing away trash is not passed on to people and businesses that generate waste.
Some waste management companies look at total waste and the percentage breakdown of recyclables and compost (how they make money). In this case, the more you produce, the cheaper your bill is. These incentives are not aligned.
In regions and cities where it is more expensive to compost, there is an opportunity for upcycling companies. However, if companies that upcycle waste enter the market, it is also possible that waste producers will have to pay more money – if their total waste decreases, their waste management company may charge more, as upcycling will divert organic waste.
Communities, local governments, and businesses will also need to collaborate on education and outreach to increase demand for composting services. We are only capturing a fraction of available food waste because most people are not aware of the benefits or are not ready to change habits. People need to realize the importance of diverting organic waste from landfills and recycling it. This will increase demand for these services and drive down costs.
We can look to where Europe is today to see where the US will be in a couple years with regards to food waste. There will be a big evolution in consumer sentiment toward sustainability and food waste. The question for the US is when this shift will happen.
Collaboration in the sector will be the key factor to address the issue of organic waste. Investors can play a part by enabling technologies to scale and grow, as well as furthering programs/incentives to reduce waste and turn it into a resource. The future will be based on minimizing waste, diverting waste from the landfill, and turning the waste we produce into value. Now is the time to invest in the future of our planet.
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