Food & Agriculture Series
To Reduce Food Waste, Investors and Community Organizations Need to Be at the Table
September 26, 2022
Food waste is created at every point in our current food supply chain––on the farm, during manufacturing and transportation, on store shelves, at restaurants, and in our homes. Today, most of that uneaten food ends up in landfills, or is otherwise disposed of––an economic dead end, and a social and environmental risk.
Amidst an increasingly urgent climate crisis, and growing inequity in food distribution, our inefficient food system is called into question. For investors and community organizations alike, finding circular solutions to reduce food waste across the supply chain is now a top priority.
What happens when food is wasted?
As much as 10% of global greenhouse gases comes from food wasted across the supply chain. Sending food to landfills misses the opportunity to convert that resource into any number of productive end uses––from compost and biogas to animal feed to packaging inputs and other products––that support the environmental, economic and social sustainability we seek in our economic system. Current practices that do not keep organic material in circulation are fundamentally unsustainable––locking in our society’s dependence on fossil fuel-based products and continually depleting soil’s regenerative capacity.
What does an ideal food system look like?
For effective strategies to manage food waste, we can look to nature. Natural agricultural cycles are some of the best examples of an efficient, closed loop system. When we harvest produce, we also take minerals and nutrients from the soil. That’s what makes our food nourishing. Importantly, food that is not eaten––surplus food and inedible remnants––contain nutrients too. Those remainders, when returned to the soil in the form of compost, enhance important microbial activity and replenish the soil for the next growing period. Food scraps are a resource that can also be transformed into clean energy and liquid fertilizer through anaerobic digestion. If managed optimally at each point of the supply chain, farming can have a reversing effect on climate change and soil depletion.
Landfilled food waste has negative value due to unpriced externalities. Diverted, it can be a valuable soil amendment, a source of energy, or input into other finished food and packaging products. This is an arbitrage to explore through financial capital and community initiatives.
What types of solutions are needed?
All manners of solutions are needed to move away from current linear processes that drive materials to landfill, as well as stop leaks in existing circular systems. Both holistic, far-influencing solutions––from public policy to childhood education––as well as technical innovations that address specific problems within the supply chains––such as developing end markets for unsold agricultural products––are critical. Until widespread public policy (with appropriate incentives) is in place, the first fundamental realignment requires risk-tolerant funding to capitalize solution providers and municipalities willing to be ‘first movers.’ The second set of solutions, which solve specific supply chain circularity challenges, will have more immediate impact and can be accelerated through a range of innovation services, including but not limited to the provision of flexible capital.
Today, investment and interest in food waste reduction are growing, and there has never been a better time to consider the range of impact solutions that need funding. In fact, in mid-May, Closed Loop Partners and ReFED announced a new Circular Food Solutions Platform that aims to catalyze an array of capital types that can support a wide range of solutions.
Let’s take a closer look at how investors and community organizations are addressing the challenge, and the impact that can be achieved when the entire value chain is engaged.
Seismic changes in regional food systems
In 2015, in the middle of San Diego County, a six-month pilot was run to take food scraps from a quick-service restaurant to a local farm with depleted soil less than one mile away, to compost and land-apply. The pilot aimed to prove the viability of closed loop regional food systems––that there is value in uneaten food, and it can be used to replenish surrounding agricultural soil. Findings from the pilot showed that the compost created from the fresh food scraps was five times more nutrient-rich than the finished compost the farm had been trucking in from 25 miles away. It not only saved the restaurant $250 per month on hauling fees, but also prevented 30 metric tons of greenhouse gases from being emitted.
This pilot was run by Solana Center for Environmental Innovation, a California-based nonprofit that has been advancing community initiatives to reduce food waste for many years. Among many other initiatives, this program planted the seed for what could be achieved through regional food systems. Today, San Diego County is now removing restrictions that previously prevented the replication of similar programs. Solana Center was awarded California’s highest environmental honor for this program, the Governor’s Environmental and Economic Leadership Award (GEELA), which recognized food waste as an environmental issue for the first time in the award’s history. More recently, Solana Center’s Executive Director, Jessica Toth, was recognized by the San Diego Business Journal as one of 50 Over 50 Influential Women, celebrating the impact of the programs run by the Center. With these developments, new technology, education and transport systems are needed to maximize and accelerate the economic and environmental benefits of these programs.
Catalytic funding funneled into circular food solutions
On the other side of the country, Closed Loop Partners, a New York-based investment firm and innovation center, has been focused on accelerating a circular economy across a range of sectors, including food and agriculture. Together with leading brands, industry groups, NGOs and investors, the firm funnels much-needed capital and network insights into industry-wide solutions and technical innovations that build a circular food system grounded in regenerative agriculture practices, recycling and transparent value chains. This includes upstream solutions that reduce food waste from the outset, and downstream solutions that can ensure uneaten food does not go to waste.
For example, Closed Loop Partners provided venture funding to ucrop.it, a company that operates as a blockchain farming and crops traceability platform that ensures certainty across crop cycles. It connects crop growers with corporate stakeholders from the agriculture value chain to agree on farming objectives for sustainable crop production, competitive financing and quality crops sourcing, to achieve greater profitability and incentivize sustainable agricultural practices. The firm also invested in ThriveLot, a company that installs and maintains edible, ecological landscaping and more for homeowners, creating a yard-to-table food system. More recently, Closed Loop Partners’ innovation center, the Center for the Circular Economy, launched a collaborative Composting Consortium to pilot industry-wide solutions and build a roadmap for investment in technologies and infrastructure that enable the recovery of compostable food packaging and food scraps.
Across the food system, financial investors, corporate strategic investors and philanthropists are deploying more capital into emerging companies creating solutions to reduce food waste and ensure that, at every stage of supply and consumption, food is used as a resource that brings value back to communities, the environment and the local economy.
ReFED estimates that $14 billion in investment is needed annually to cut food waste in half by 2030, the goal set by the US EPA and driven by international targets. Over 20% of that $14 billion is needed for risk-tolerant funding for far-reaching initiatives, like those driven by community organizations such as Solana Center. The annual impact of $14 billion in investments per year is estimated to drive $73 billion in net financial benefit and reduce 75 million tons of GHG emission; over ten years, it could also create 51,000 jobs annually.
Investors and community organizations play distinct yet critical roles in advancing shared goals. Mitigating food waste will require consumer, producer and government engagement as well as financial investment. Effective deployment of capital and policy, with stakeholders from across the value chain collaborating on shared goals, can make a notable difference in driving economic, social and environmental benefits for communities and investors, addressing climate change, and building a more resilient, waste-free food system.
Interested in a further discussion on this important topic? Please contact Closed Loop Partners here.