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A staggering one-third of all food produced is lost or wasted, with catastrophic impacts on the environment, economy and society. The European Bank for Reconstruction and Development (EBRD) and the FAO Investment Centre have examined in this brief how development banks can help reduce food loss and waste (FLW) along supply chains, providing recommendations which could bring considerable economic, social and environmental benefits.

“Every kilo of food saved from loss or waste immediately translates into less greenhouse gas (GHG) emissions and a more efficient use of precious natural resources such as land and water, which also means improving global food security,” said Nuno Santos, Senior Economist, FAO Investment Centre, and lead author of the brief.

Squandered resources

Food produced for human consumption is being lost or wasted at the shocking rate of 1.3 billion tonnes each year, equating to almost 1.5 billion hectares of productive land squandered. Food losses only – which refer to the food lost post-harvest prior to reaching the retail stage – were estimated at 14 percent in 2019.

The cost to the environment and climate is considerable: the global environmental footprint of FLW is approximately 7 percent of GHG emissions and 6 percent of global freshwater withdrawals.

“This year, multiple crises are challenging global food security likely pushing even more people into hunger, compounding the effects of COVID-19, way above FAO’s 2020 estimate of between 720 and 811 million hungry people. Greening our food systems also remains an absolute priority. In this situation, the scale of food loss and waste is unconscionable,” said Mohamed Manssouri, Director, FAO Investment Centre.

COVID-19 and food waste

COVID-19 has caused even more food to be spoiled and wasted, due to disruptions of supply chains such as trade blockages and border delays which impacted the movement of food products.

Yet, the pandemic has provided a strong rationale for investment in FLW reduction by shining a spotlight on bottlenecks within the global food system. Minimizing FLW means improving storage facilities and equipment to reduce post-harvest crop losses, or resolving logistics blockages.

Business case and regulations

The economic cost of FLW is estimated at USD 1 trillion every year. Yet research by the Champions 12.3 coalition across 17 countries and 700 companies indicates that there is a strong business case for private businesses to reduce FLW. In many cases, the benefits of eliminating losses outweigh the costs of interventions. 

Beyond the business case, regulatory scrutiny is increasing. Environmental, Social and Governance (ESG) reporting for food retailers operating in the EU market is likely to become mandatory within the next two years. It will soon become imperative for companies in the EU to develop disclosure frameworks – including on FLW.

Opportunities for development banks

There is a wide range of actions that development banks can take to support governments and private companies in their efforts against FLW. First, reducing food waste begins with measuring it. Development banks can invest in data collection and analytics to help governments and companies understand better where FLW is occurring in specific value chains and country contexts.

At the policy level, development banks can work with governments improve laws and regulations that impact FLW. In many countries, laws could be improved to facilitate donations of surplus food by retailers to the food insecure and vulnerable. Development banks can also promote information sharing on food markets and food-related trade measures, to minimize the risk of disruption and wastage.

“The EBRD through its Agribusiness Strategy and its Green Economy Transition Approach is committed to supporting the private sector, with investments and advisory services aimed at reducing food waste throughout the value chain,” said Natalia Zhukova, Head of Agribusiness, EBRD. “This includes promoting processes, practices and technological options to introduce alternative materials, adopting circular business models and introducing circular elements in the governance model.”

“We are pleased to have collaborated with our long term partner FAO in developing recommendations and guidelines on FLW, which identify and promote policies, regulatory measures and business practices that can have a positive impact on the prevention, reduction and management of FLW at supply and retail levels,”  continued Zhukova.

From a direct investment perspective, development banks – together with the public and private sector – are in a good position to finance modern infrastructure at the cooling, storage, manufacturing, distribution, transportation and retail levels, which can all limit FLW.

Development banks can join forces with donors and private financial players to launch products or vehicles that specifically target FLW reduction, such as sustainability-linked loans, sustainable development bonds, private sector foundations and agricultural investment funds.

Given their convening power with donors, development banks could play a catalytic role in setting up a global or regional FLW reduction facility, using first loss capital from donors to attract private sector investments in FLW virtuous supply chains, focussing on emerging economies.

Reducing FLW is an area in which development banks can have high impact, acting to improve food security, safeguard environments, and sustainably transform agrifood systems.