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Tackling food and packaging waste

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Future of Food by Lucy Acton, Associate Director ESG at HSBC Global Research.

The pandemic has highlighted the need for efficient food supply chains, and the importance of food surplus redistribution to the vulnerable.

Household food waste fell during lockdowns as shoppers purchased and consumed more efficiently, but this trend is now in reverse. The movement for addressing plastic waste appears in flux too; bans and charges on single use carrier bags have been lifted in many places over hygiene concerns. Ocean conservationists have warned of the impacts this is having on marine plastic waste.

It is more important than ever that retailers prioritise food waste and packaging waste in their sustainability policies to minimise reputational and regulatory risks. Food and packaging waste are important global themes in the UN Sustainable Development Goals (SDGs) and circular economy plans. The SDGs target a 50% fall in food waste by 2030. 1

We believe that retailers will increasingly be under scrutiny for food waste generation, and that this should therefore form a key part of their ESG risk considerations.

Lucy Acton, Associate Director ESG at HSBC Global Research

“Reducing more than 1 billion tons of food that’s lost or wasted each year would bring big social, environmental and economic benefits – but bringing these benefits to scale requires action across the entire supply chain,” according to Dr Andrew Steer, President and CEO, World Resources Institute.2

Food production is resource and emissions intensive and even more so when it is wasted, where it accounts for c.8% of anthropogenic GHGs (WWF). Intensive agricultural practices lead to loss of ecological services and biodiversity.

As awareness and policy level discussions about circular economies and food waste rise up the agendas of many economies and societies, we believe that retailers will increasingly be under scrutiny for food waste generation, and that this should therefore form a key part of their ESG risk considerations.

The circular economy is a relatively new concept and particularly challenging to implement in an industry such as food retail where the product lifecycle is short and transactions volume are very large. The potential for leakage is significant and infrastructure will be a challenge for retailers. It may well be very hard to gain consumer buy in and establish new behaviours.

There is likely to be consumer resistance to refillables for a range of reasons, including hygiene concerns, convenience, and willingness to pay a deposit for packaging. This is an area of innovation and it is naturally going to take time for the industry to learn the best way of operating and to find balance. In this context, we can only really judge companies on the effort they are making rather than the initial success they have

Sustainability frameworks incorporate packaging and food waste. Retailers suffer increased costs when they generate food waste along the supply chain, and consumer and policymaker sentiment means the pressure is on to burnish credentials in this area to mitigate reputational risk.

For more insights from Lucy or the wider Global Research team: https://www.gbm.hsbc.com/author?author=lucy-acton

How MENAT is forming a food-secure future

Food security has been a perennial issue for Middle East, North Africa and Turkey (MENAT) countries due to the scarcity of water, arid climate and dependence on imports across the region.

Despite its governments’ investment in agricultural technology and purchase of farmland abroad for food cultivation, the region remains a net food importer. Addressing food security will require stakeholders to focus on three key areas: supply-side issues, societal changes, and the environment.

Food systems during COVID-19

Indeed, supply chain disruptions as a result of the COVID-19 crisis have already led to higher food prices across the world3. And with the global population expected to reach 9.7 billion by 20504, governments, companies and consumers will need to review consumption habits and create a sustainable ecosystem that ensures the availability of affordable healthy food and ingredients to everyone.

The imminent surge in food consumption is in contrast to stagnant production levels. The Global Agriculture Productivity Report 20205suggests the world’s food productivity is growing at 1.63%, which is short of the 1.73% needed to feed the world.

Stocking up

Over the past decades, MENAT countries have invested heavily in boosting local production and committing to local agriculture supply chains. Investments in new agri-tech innovations such as hydroponics and vertical farming is also ensuring that they focus on high-yield crops that don’t stress water and power resources.

As such, the value of agriculture production in MENAT has more than doubled to US$ 37 billion in 2019, compared to US$ 16 billion in 2000, according to FAO6. Meat production also surged to US$ 70.5 billion in 2019, from US$ 31.34 billion nearly two decades earlier.7

Diversification of food imports and ease of access to food are also priorities for MENAT countries, given that many of them will remain net food importers for the foreseeable future.

Reducing Waste and waistlines

Food waste is another issue in many MENA countries The average annual amount of food waste is estimated at 427 kg per person in KSA, 197 kg per person in the UAE and 73 kg per person in Egypt, compared with the 95-115 kg average per person in Europe and North America, according to an HSBC-EY Food for the Future report.

The Saudi Grains Organisation8 noted that 33% of food in the kingdom is wasted, costing the economy US$ 10.7 billion. In the UAE, it has reached US$ 4 billion.9

Gulf countries have rolled out a number of initiatives and promotional campaigns to raise awareness and promote sustainable consumption. The UAE’s Food Waste Pledge10, for example, helped the country recover nearly 2 million meals in 2019.

The UAE Ministry of Climate Change and Environment deployed digital tools to drive improvements in kitchen production processes and to help cut food waste in half, saving money and reducing environmental footprint at the same time.

Building sustainable networks

Crop diversification that provides more depth to the region’s food stock and leverages technology is another vital tool in the countries’ arsenal to combat food security challenges. The focus on technology is also spurring more entrepreneurial ventures in parts of the region.

In 2019, HSBC teamed up with the International Centre for Biosaline Agriculture (ICBA) to “build sustainable networks and unleash the entrepreneurial potential of farming communities living in the marginal environments of Egypt and the UAE.”11

The desertification of land and changes to the environment have made MENAT’s agriculture and food companies even more concerned of the climate crisis at hand.

The UAE is boosting investment in R&D for sustainable agriculture and agri-tech with a commitment to invest US$ 1.5 billion over five years.

In 2019, Saudi Arabia launched the Sustainable Agricultural Rural Development Program valued at US$ 1.78 billion, in a bid to boost production, processing and marketing of fruit, fish, livestock and Arabic coffee, and the systematic cultivation of rain-fed crop.12

There is a concerted effort to produce durable, healthy and sustainable foods in the region. Tailoring crops to the environment is also crucial to planting the seeds of a more efficient agriculture sector in the region.

All aspects of society – governments, corporations and the wider society will need to play their part to improve food security in the region. And there are clear signs that all three stakeholders are conscious that agriculture produce needs to be seen in a new light in an era of sustainability.

The upside of improving food and agriculture efficiency is huge. It would help lower regional countries’ food import bills, improve health and lifestyles of citizens, inject entrepreneurship and investment opportunities in the sector, and reduce dependence on highly fragile and volatile supply chains.