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Credit Suisse research shows global food inequality and waste costs up to US$13.6 trillion annually

Credit Suisse Research Institute (CSRI) published a new research report entitled ‘The global food system: Identifying sustainable solutions’, the first under new Chairman António Horta-Osório. The report examines the discrepancy in food production and waste and highlights potential solutions to reduce the estimated US$13.6 trillion annual cost.

A sustainable global food system benefits human health as well as the global eco-system. However, at present almost 700 million people are undernourished while 40% of the world’s adult population is overweight or obese. Some studies suggest that 20% of total deaths among adults can be attributed to dietary risks. Food production, and importantly consumption, needs to change significantly in order to address these challenges. Roadblocks that need to be overcome include the need for tighter regulation and a review of the global agricultural sector.

Food production and consumption has a major environmental impact
Malnutrition is not the only reason why the global food system needs to change. Food production and consumption already contribute well over 20% of global greenhouse gas emissions and account for more than 90% of the world’s freshwater consumption (see also: Water scarcity: addressing the key challenges). The analysis suggest that the environmental footprint of the global food system is likely to worsen significantly during the next few decades unless action is taken. The likely growth in the world’s population to c10 billion by 2050 coupled with a further shift in diets, especially across the expanding emerging middle class, could increase food-related emissions by a further 46% while demand for agricultural land could increase by 49%. This is incompatible with the need to achieve a net-zero emission environment globally by 2050.

Food loss and waste needs to be addressed
The challenges associated with malnutrition and the environmental footprint could partly be addressed by targeting food loss and waste. More than 30% of food produced is either lost or wasted which meant that in 2019 cUS$408 billion of produced food went unsold or uneaten. The combined economic, environmental and social cost associated with food waste is estimated at US$2.6 trillion by the Food and Agriculture Organization of the United Nations (FAO). Eliminating food waste in the US and Europe alone would add 10% to the world’s available food supply. Solutions need to focus across the entire supply chain as c50% of food loss and waste occurs during the production and handling phase while 45% takes place in the distribution and consumption phase.

Who’s most at risk from food sustainability?
The simultaneous existence of undernourishment, obesity, the environmental footprint of food production and food waste puts the global food system under significant stress. However, these factors do not impact all countries in the same way suggesting that different solutions or strategies are needed for different countries. Using the Food Sustainability Index, developed by the Barilla Center for Food and Nutrition, we find that France, the Netherlands and Canada score best while sustainability is lowest in Russia, Bulgaria and the UAE. Sustainability challenges differ between regions: developed countries score worse on diet patterns and food waste whereas emerging countries need to address food loss and general life quality.

A change in diet is required
A change in diet towards one that is plant-based appears inevitable if the global food system is to become more sustainable. Research suggest that a plant-based diet not only has a c90% lower emission intensity than that of a current average diet but that it also has the potential to reduce the number of premature deaths among adults by c11million. There is strong growth potential for alternative animal-protein products and the report estimates that the market for alternative meat and dairy can grow from a current size of cUS$14 billion to US$1.4 trillion by 2050. Despite the involvement of more than 600 largely small and private companies in this field, the authors expect the traditional food companies to play a key role as they steadily transition their operations towards healthier and alternative food products.

Agriculture needs to go digital
The combination of continued population growth, rising spending power and declining arable land per capita suggest that a shift in diet alone may not be enough to make the food system more sustainable. Further productivity improvements across the food supply chain and in both developed and emerging economies can be achieved by large scale adoption of new technologies. The report highlights more than 70 including vertical farming and precision agricultural solutions.

Sharing, circular-solutions, packaging and cooling help address food loss and waste
Reducing the more than 30% of food that is either lost or wasted would significantly aid the quest for a more sustainable food system. Donating or sharing food would be an obvious and very effective way to address food waste. Circular-based solutions such as those that use food waste to create new (food) products help too. Smart packaging solutions are being developed that not only help improve production yields but importantly help reduce food loss and waste across the entire supply chain from farm to the home. The development and introduction of cooling and storage solutions would help extend the lifespan of food even more.

Eugène Klerk, Head of Global ESG & Thematic Research at Credit Suisse, said: “New technologies will need to accompany behavioral change. A shift in diet alone will not be enough in itself to make the food system wholly sustainable. Our report thus highlights an array of technological solutions that have the potential to improve productivity, expand the product offer and crucially reduce waste. In addition, it showcases innovative companies and their pioneering technologies designed to meet the challenge.”

Michael Strobaek, Global Chief Investment Officer at Credit Suisse, commented: “Sustainability is a risk that companies must adequately and proactively manage. And, as other sectors before it, the food industry is going to be increasingly scrutinized by investors, consumers and regulators, pushing it to focus more on sustainable and above all, healthy food. There could be material liability risks down the road otherwise. There are also likely beneficiaries from this transition, including technology companies providing “smart-agricultural” solutions, vertical and precision farming to meet urban food demand and provide productivity yields, companies who use circular-based or smart-packaging solutions and the development and introduction of cooling and storage solutions that help extend the lifespan of food even more. But ultimately, it is really about people living a longer and more healthy life altogether, and I am convinced that investors play a significant role in catalyzing these emerging trends in how they deploy their capital.”