Why finance is key to tackling the growing global issue of food waste
In this article, Andrew Shannon, founding partner of Circularity Capital, explains how a new wave of businesses are harnessing the circular economy to tackle the growing global issue of food waste and why finance is key to unlocking widespread opportunity.
According to insight from the World Food Programme (WFP), nearly a third of all food produced for human consumption is squandered or lost before it can be consumed due to inefficiencies across the supply chain. This amounts to more than 1.3 billion tons per annum, worth approximately US$1 trillion and sufficient to feed two billion people – more than twice the number of undernourished citizens across the globe.[1]
While society is already struggling to satisfy escalating food demand, the world’s population is set to reach 9.8 billion by 2050,[2] soaring more than 12% from a 2024 baseline.[3] Data from the Royal Geographical Society (RGS) suggests that, if this situation materialises, we will need to increase food production volumes by more than 70% to meet basic demand requirements.[4] This will require a significant uplift in resource efficiency, as well as a revolutionary approach to minimise food loss.
Dated, linear, take-make-dispose models of production and consumption are clearly unfit for purpose as we accelerate towards an increasingly pressured food system. If we are to move forward, widespread innovation is essential to maximise efficiencies, improve supply security and build a far more robust supply chain for the future.
The impact of legislative pressures
While economic pressures are prompting the food supply chain to embrace new ways of working, environmental legislation is also bringing about notable change. After all, as one of the 17 Sustainable Development Goals (SDGs), cutting global food waste in half by 2030 is one of the UN's top priorities.
Elsewhere, the EU recently published its Circular Economy Action Plan (CEAP). Positioned as a cornerstone of the European Green Deal, the document provides a roadmap towards a circular industrial economy that prioritises the environment and works to eliminate waste.
CEAP focusses on four key objectives: making sustainable products the norm in the EU; empowering consumers to embrace circularity; focussing on the lifetime of products through a sectoral lens; and reducing waste. In simple terms, it aims to ensure that companies accelerate their transition towards circular business models.
The action plan aims to drive widespread business change. The EU is not simply looking for incremental improvements in technology, but instead is committed to driving a paradigm shift. Brands therefore need to think about a supply chain that makes the most of resources and reduces waste significantly.
Driving circular progress
When it comes to improving efficiencies across the food supply chain, one business really leading the way is Matsmart-Motatos, the leading D2C e-commerce retailer of overstock dry foods and consumer products. By procuring and reselling overstock goods that traditional retailers can’t buy, Matsmart’s business model is designed to tackle waste head-on.
The business has already recirculated more than 60,000 tonnes of food and consumer products, preventing widespread environmental impacts while simultaneously solving a structural commercial challenge for FMCG suppliers. As a result, Matsmart-Motatos is the leading food overstock retailer in the Nordics and the fastest growing business in its sector across Germany.
Another business disrupting the supply chain status quo is Winnow. A pioneer in AI solutions, the company has developed a first-to-market solution for designing out food waste in commercial catering facilities. With operations in 29 countries, Winnow works with thousands of chefs to reduce food waste. Sites using the solution typically see food waste cut in half within 12 months from the point of installation, resulting in an increase in gross margin of between 2-6%.
The company’s unique technology is already being used with global hospitality brands such as IKEA, Compass Group, AccorHotels and Carnival Cruises, who have all rolled out Winnow solutions at scale. Feedback is hugely positive, with businesses previously hampered by rising purchase and disposal costs now able to navigate the issues with confidence.
Since partnering with Winnow, Ingka Group, the largest IKEA retailer, has announced a 54% reduction in food waste across its stores worldwide. This makes it the first major corporate to meet the SDG of halving food loss and waste by 2030.
But alongside the commercial case, there is also a significant environmental benefit for companies in reducing waste. Winnow estimates that its clients save the equivalent of 36 million meals annually through the use of AI technology,[5] diverting resource away from landfill and preventing the unnecessary creation of methane (released during the degradation of food and considered 21 times more damaging to the environment than CO2).
But why are these two companies relevant? Well, they demonstrate that the future of the food supply chain can be both circular and successful, with new and innovative solutions not only able to meet the demands of global customers, but also capable of setting the standards in environmental performance. Indeed, circular business models can achieve both profit and purpose, while alleviating many of the challenges experienced by some of the sector’s more traditional companies.
The circular economy is restorative and regenerative by design, with resources previously considered waste effectively eliminated. While Winnow prevents waste from arising in the first place, Matsmart-Motatos redistributes resources to keep them in the value chain for longer.
Growth-stage capital funding
When we founded Circularity Capital in 2015, we did so with the firm conviction that entrepreneurs of growth stage businesses who are developing the circular innovations to make this transition a reality deserve a specialist investor with the right knowledge and network to unlock their full potential.
We have worked hard to develop a firm with the right capabilities to make this a reality and are currently deploying our second dedicated circular economy private growth-equity fund – at €215m, it is the largest of its kind globally.
Our current portfolio includes a number of leading circular businesses across Europe, but our ambition is to further grow this investment base by supporting leading, innovative, circular businesses where we can add value as a domain expert investor.
It’s clear to see that the circular economy provides a strong framework for decoupling business growth from resource constraints, enhancing resource productivity and driving competitive advantage. It also highlights a subset of business models which are enabling this transition and can generate premium returns for investors. Indeed, circular economy thinking will drive industry for years to come.
The global food supply chain is set to experience rapid change over the coming years. At Circularity Capital, we’re looking forward to playing a leading role in the sector’s transition towards a more resource-efficient supply chain for the future.
[1] https://www.wfp.org/stories/5-facts-about-food-waste-and-hunger
[2] https://www.un.org/tr/desa/world-population-projected-reach-98-billion-2050-and-112-billion-2100
[3] https://www.worldometers.info/world-population/
[4] https://www.rgs.org/schools/resources-for-schools/feeding-the-9-billion#:~:text=By%202050%20there%20will%20be,if%20it%20is%20evenly%20distributed.